Problem #9 Assume that you may trade 3 securities: a risk-free asset that retums r, = 5%, a bond fund with expected return E(,)-8% and standard deviation ?(-)-12% and a stock fund with expected return E()= 13% and standard deviation ?(r.)-20%. In addition the coefficient of correlation between the bond fund and the stock fund is pas 0.3. Recall the formula to compute the variance ofa portfolio ?:-(mo, ). (ws.). 2(w,o,)(ws?.0s . You perform some computations and determine the minimum variance portfolio consists a. of w 0.82 in the bond fund and w 0.18 in the stock fund. Calculate the expected return and standard deviation of the minimum variance portfolio. 82 You perform more computations and determine the optimal risky portfolio consists of w: = 0.40 in the bond fund and wg = 0.60 in the stock fund. Calculate the expected return and standard deviation of the optimal risky portfolio