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1) Assets Stock fund Bond fund Expected Return Standard Deviation 14% 7% 26% 13% The correlation coefficient between the returns of the stock fund

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1) Assets Stock fund Bond fund Expected Return Standard Deviation 14% 7% 26% 13% The correlation coefficient between the returns of the stock fund and the bond fund is 0.45. The return on the risk-free asset is 3%. a) Calculate the weights of the two assets that form the optimal risky portfolio. Also compute the expected return and standard deviation of the optimal risky portfolio.

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