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JPMorgan Chase is managing a client's investment portfolio. The client wants to allocate funds among three assets: stocks, bonds, and real estate investment trusts (REITs).
JPMorgan Chase is managing a client's investment portfolio. The client wants to allocate funds among three assets: stocks, bonds, and real estate investment trusts (REITs). Based on historical data, the expected returns and standard deviations of each asset are as follows:
- Stocks: Expected Return - 10%, Standard Deviation - 15%
- Bonds: Expected Return - 6%, Standard Deviation - 5%
- REITs: Expected Return - 8%, Standard Deviation - 10%
If the client desires a portfolio with an expected return of 8% and a standard deviation of 8%, calculate the optimal allocation of funds among the three assets to minimize risk while achieving the target return.
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