Problem 4 [15 points] You currently have $1,000,000. You want to invest it in the following three assets: 10-year US Treasury bond with coupon rate 45%. Blandy and Goumange stocks, which have the following historical annual returns Bland 26.0% 15.000 14.0% -15.0% 2.0% 10.0% 22.0% 30.0% 32.0% 28,0% 28.6% 16.5% -15.4% -16.5% 2.2% -11.0% 62.2% 33.000 35.2% 50.890 23.4% 13.5% -12.6% -13.5% 1.800 9.0% 18.8% 27.0% -28.8% 25.2% Year Gourmange 47.000 54.0% 15.0% 7.0% 28.0% 40.0% 17.0% 23.0% 4.0% 75.0% 51.7% 59.4% 16.5% 7.7% 30.8% 44.0% 18.7% -25.3% 4.4% 82.5% 42.3% -48.6% 13.5% 6.3% 25.2% 36.0% 15.3% 20.7% 3.6% 67.5% 9 10 12 14 16 17 18 19 20 21 24 26 27 28 29 30 Your goal is to have the expected annual return of 7.6% with a minimum portfolio risk. How much money should you allocate to these three assets? What is the minimum portfolio risk (i.e., the standard deviation)? Problem 4 [15 points] You currently have $1,000,000. You want to invest it in the following three assets: 10-year US Treasury bond with coupon rate 45%. Blandy and Goumange stocks, which have the following historical annual returns Bland 26.0% 15.000 14.0% -15.0% 2.0% 10.0% 22.0% 30.0% 32.0% 28,0% 28.6% 16.5% -15.4% -16.5% 2.2% -11.0% 62.2% 33.000 35.2% 50.890 23.4% 13.5% -12.6% -13.5% 1.800 9.0% 18.8% 27.0% -28.8% 25.2% Year Gourmange 47.000 54.0% 15.0% 7.0% 28.0% 40.0% 17.0% 23.0% 4.0% 75.0% 51.7% 59.4% 16.5% 7.7% 30.8% 44.0% 18.7% -25.3% 4.4% 82.5% 42.3% -48.6% 13.5% 6.3% 25.2% 36.0% 15.3% 20.7% 3.6% 67.5% 9 10 12 14 16 17 18 19 20 21 24 26 27 28 29 30 Your goal is to have the expected annual return of 7.6% with a minimum portfolio risk. How much money should you allocate to these three assets? What is the minimum portfolio risk (i.e., the standard deviation)