Question
As an investor, you decide to hold a portfolio with 60% invested in a European green bond fund and 40% in a European renewable energy
As an investor, you decide to hold a portfolio with 60% invested in a European green bond fund and 40% in a European renewable energy equity fund. The expected return is 2.50% for the bond fund and 9.25% for the equity fund. The expected standard deviation is 7.50% for the bond fund and 24.50% for the equity fund.
a) What will be the portfolios expected return and risk given that the correlation between the bond and equity fund is expected to be -0.10? (express the portfolio risk as its standard deviation) b) Compare the risk-adjusted return of the portfolio and the individual funds, and comment on the reason for the differences. (5 marks)
answer a and b please
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