Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Historically the S&P500 index return has averaged 8% higher than the T-bill return, and its standard deviation has been 20% per year. Assume these historical
Historically the S&P500 index return has averaged 8% higher than the T-bill return, and its standard deviation has been 20% per year. Assume these historical averages represent investor expectations of future S&P500 risk and return also, and that the expected return on a T-bill is 5% with zero standard deviation. Calculate the expected return of a portfolio that has 80% weight allocated to the T-bill and 20% weight allocated to an S&P500 index-tracking ETF. Please enter your answer in decimal form rounded to the third decimal place. Calculate the variance of a portfolio that has 20% weight allocated to the T-bill and 80% weight allocated to an S&P500 index-tracking ETF. Please enter your answer rounded to three decimal places
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started