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Please solve by hand and show all steps: 3. Assume you have all of your wealth (a million dollars) invested in the Vanguard 500 Index
Please solve by hand and show all steps:
3. Assume you have all of your wealth (a million dollars) invested in the Vanguard 500 Index fund (a proxy for the market portfolio) and that you expect to earn an annual return of 12 percent, with a standard deviation of returns of 25 percent. You have become more risk-averse, and so you decide to shift $200,000 from the Vanguard 500 Index to Treasury bills. The Treasury bill rate is 4 percent. Estimate the expected return and standard deviation of your new portfolioStep by Step Solution
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