Question
Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8%
Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 29% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 4%. |
Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as follows: (Leave no cells blank - be certain to enter "0" wherever required. Do not enter your answer as a percentage but in a decimal format. Round "Expected Return" to 4 decimal places and the "Variance" to 4 decimal places.) |
WBills | WIndex | Expected Return | Variance | |
0.2 | 0.8 | 0.1040 | 0.0538 | Example |
0.0 | 1.0 | |||
0.6 | 0.4 | |||
0.8 | 0.2 | |||
0.4 | 0.6 | |||
1.0 | 0.0 | |||
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