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6. (15 points) A recent advertisement on KVUE promoted investing retirement savings using a balanced mutual fund. The advertiser's balanced fund is 50 percent stocks
6. (15 points) A recent advertisement on KVUE promoted investing retirement savings using a "balanced" mutual fund. The advertiser's balanced fund is 50 percent stocks and 50 percent investment grade corporate bonds Expected Annual Return Standard Deviation of Annual Return Stocks 11% Bonds 6% 8% 20% The historic correlation between the returns of well-diversified stock and investment grade corporate bond portfolios of 0.15 is expected to continue. a) What is the expected return of the sponsor's balanced fund? b) What is the predicted standard deviation of the sponsor's balanced fund? If you put $3,000 per year into this portfolio for 30 years starting today, what is the expected value of the portfolio at the end of the 30 year? c)
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