Question
As an individual investor, you have three funds to invest into. The first is an equity fund, the second is a corporate bond fund, and
As an individual investor, you have three funds to invest into. The first is an equity fund, the second is a corporate bond fund, and the third is a T-bill money-market fund (your risk-free asset). Fund Expected rate of return Risk (Standard deviation) Equity fund 18% 39% Corporate bond fund 13% 22% T-bill money market fund 5% Correlation between equity fund and bond fund returns is 2.0. Find the risk (standard deviation) of the optimal portfolio formed from Equity and Bond funds. (Do not round intermediate calculations; round your final answer to 4 decimals. Input percentages in a decimal form: e.g for 12.45% type in 0.1245).
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