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Question 4. Over the past three years: . The annual rate of return on the market portfolio has been 14.0%, 20.0%, and 5.0%. The annual
Question 4. Over the past three years: . The annual rate of return on the market portfolio has been 14.0%, 20.0%, and 5.0%. The annual risk-free rate of return has been 2.0%, 2.0%, and 2.0% . The annual rate of return on stock X has been 12.0%, 15.0%, and 3.0%. . The annual rate of return on stock Y has been 2.0%,-1.0%, and 5.0%, implying an expected return of 2.0% and an unbiased sample standard deviation of 3.0%. (a) What is the expected return and unbiased standard deviation of return for X? (b) What is the expected return and standard deviation of a portfolio that invests $400,000 in X and $600,000 in Y? (c) Based on the mean-standard deviation rule, would you prefer to invest $1,000,000 in Y OR to invest $400,000 in X and $600,000 in Y? Briefly explain your
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