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A stock portfolio has an expected return of 12% and a standard deviation of 20%. A bond portfolio has an expected return of 6% and
- A stock portfolio has an expected return of 12% and a standard deviation of 20%. A bond portfolio has an expected return of 6% and a standard deviation of 9%. The two portfolios have a correlation coefficient of 0.3. T-Bills have an expected return of 2%. Your coefficient of risk aversion is 7. Be sure to show your work for partial credit. (15 points)
- What are the weights of the minimum variance portfolio that can be formed between the two portfolios if they are the only risky assets being considered?
- What is the expected return and standard deviation of the minimum variance portfolio?
- How much should you allocate between T-Bills and the risky portfolio?
- What is the expected return and standard deviation of your complete portfolio?
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