Number 5

Given the expected returns calculated for each of the mutual funds above, estimate the betas of these funds. Assume a risk-free rate of 4 percent and the expected market return equal to the expected return on the S&P 500 Index. If you decide to invest your money equally in the Small-Cap and Bond funds, what would your portfolio's expected return and risk level (standard deviation and beta) be? What would happen if you were to put 70 percent of your portfolio in the Small-Cap fund and 30 percent in the S&P 500 Index fund? Would this combination be better for you