1. Consider that the investment fund ABC Fund exists and it is 75% invested in normal stock and 25% risky bonds

Assume you have the following historical data of annual returns:

Return S.D.

Normal Stock 8.9% 20%

Risky Bonds 10.8% 35%

High Risk Stock 14% 40%

Normal Bonds 6% 10%

What is the expected return of ABC fund?

Please use 5 decimal places in your response

2. Consider 123 Fund (which is invested in 35% High risk stock and 65% normal bonds).

Assume you have the following historical data of annual returns:

Return S.D.

Normal Stock 8% 20%

Risky Bonds 10% 35%

High Risk Stock 14% 40%

Normal Bonds 6% 10%

Assume High Risk Stocks and Normal Bonds have correlation coefficient of 0.24

Find the standard deviation of 123.

Please use 5 decimal places in your response

3. Use the following information:

E[r_XOM] = 15.6%, standard deviation_XOM = 15.9%

E[r_MS]=29.7%, standard deviation_MS = 35.2%

Correlation of returns: _XOM,MS = 0.139, r_f=10%

If the optimal amount to invest in the first asset (w) is 0.43, what is the variance of the risky portfolio when w=0.43? (write in decimal format using 5 decimal places)