Question: Consider the following data: Expected return on shares: 22% Expected return on bonds: 8% Variance of return on shares: 9% Variance of return on bonds:

Consider the following data:

Expected return on shares: 22%

Expected return on bonds: 8%

Variance of return on shares: 9%

Variance of return on bonds: 4%

Correlation between share and bond returns: 0.6 Calculate the optimal mix of shares and bonds for investors with a risk tolerance of:

(a) 1

(b) 2.5

(c) 3.0

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