Consider the following capital market expectations Stock Bond T-Bills E() 18% 8 5 SD 21% 8.5% 0 11. . Find the optimal portfolio mix (weights) of stock and bond if the covariance between the stock and the bond return is -0.0121 12. Find the stdev of this optimal portfolio a. Calculate the variance -> square root it -> sigma p = stdev b. Answer: approx. 5% 13. Find the most efficient way to get 8% from investing in stock, bond, and t-bills a. Need to calculate what percentage you need to invest in risky i. This was the "y" thing in class ii. That means, calculate "y" first (amount invest in risky = amount in stock and bonds) 1. T-bills = 1-(amount invested in risky) 2. Answer = approx. 50% risky; 50% risk free a. 50% risky (find how much in stock, how much in bond) 14. What is the STDEV of the above portfolio