Hello,

Question: Was the baseline-mix efficient? (ignore real assets: REITs and Commodities).

Info: The current baseline mix is:

• 55% Domestic Equity, Expected Return = 12.94% and Standard Deviation 15.24%
• 30% Foreign Equity, Expected Return = 12.42% and Standard Deviation 14.44%
• 15% Long Term Bonds, Expected Return = 5.40% and Standard Deviation 11.10%

See attached for the correlations and additional data.

My thought was to work out the Return on investment and standard deviation of the current baseline mix (ie 55% Domestic Equity, 30% Foreign Equity and 15% Long Term Bonds). Then plot that data point against the data in Exhibit 5a (see attached image) to see if it is close to the efficiency frontier.