196203003%20Home%20Assignment%202.pdf FIN 3003 Principles of Investments 18S1 Home Assignment 2 The following table presents the performance of stock and bond funds under various Probability Rate of return of stock fund (%) 36 10 15 34 Rate of return of bond fund (%) .8 12 Severe recession 0.05 Mild recession 0.25 Normal growth 0.50 Boom 0.20 a. Caleulate the expected returns of the stock and bond funds. (4 marks) b. Calculate the standard deviations of the stock and bond funds. (4 marks) eCalculate the correlation coefficient of the stock and bond funds. (2 marks) d. Suppose an investor forms a portfolio with stocks and bonds. Find the investment opportunity set in differing proportions. (10 marks) Weights in Portfolio expected Portfolio standard deviation stock fund 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 e. Draw the investment opportunity set. (3 marks) f. Calculate the weight in stock fund, expected return and standard deviation of the minimum-variance portfolio. (6 marks)