Q1. Portfolio Returns

i. stock has mean of 8% and stdev of 20%;

ii bond has mean of 4% and stdev of 10%;

iii correlation b/w stock and bond of -0.2;

iv. cash return is 1% for lending and borrowing.

Q1b: the mean and stdev of a fully invested yet unleveraged portfolio that assign weights based on the inverse of risk is 5.33% and 8.43%, respectively.

1.if you want to target 10% stdev risk per year, how would you combine Q1b risk parity portfolio with cash in this case?

2.if you want to target 10% stdev risk per year, yet you believe correlation has changed to +0.5. How would you combine Q1b risk parity portfolio with cash in this case?