5 |- Suppose you have some money to invest and for simplicity, let's assume that it is $1. You are planning to put a fraction w into a stock market mutual fund and the rest (1-0) into a bond mutual fund. Suppose that a $1 invested in a stock fund yields R after one year and a $1 invested in a bond fund yields R. and are random variables with expected value of 14% and 10% respectively, and standard deviation of 5% and 3% respectively. The correlation between and is 0.75. If you place a fraction w of your money in the stock fund and the rest (1-w), in the bond fund then the return on your investment will be R = R + (1-0). The risk associated with your investment is measured by the standard deviation o 5 1a. If you decide to invest 60% of your $1 in stock and the rest in bond, then what is the expected return of your investment? What is its associated risk