Questions g h I j thx

The following table presents the performance of stock and bond funds under various soenarios Scenario Rate of return of bond fund (%) -9 Probability Rate of return of stock fund (%) 0.05 40 ().20 -15 0.50 12 0.25 30 Severe recession Mild rocession Normal growth Boom 11 5 -2 a. Calculate the expected returns of the stock and lxond funds. (4 marks) b. Calculate the standard deviations of the stock and bond funds. (4 marks) c. Calculate the correlation coefficient of the stock and bond funds. (2 marks) d. Suppose an investor forms a portfolio with stocks and bonds. Find the investment opportunity set in dillering proportions. (10 marks) Portfolio standard deviation Weights in Portfolio expected stock fund return 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 1.0 c. Use Excel to draw the investment opportunity wel. (3 marks) f. Calculate the weight in stock fund, expected return and standard deviation of the minimum-variance portfolio. (6 marks) 4. Given the T-bill rate is 2.5%. Calculate the weight in stock fund, expected return and standard deviation of the optimal risky portfolio. (6 marks) h. Calculate the Sharpe ratio for the optimal risky portfolio. (2 marks) i. Use Excel to draw the capital allocation line (CAL) on the diagram in part (e). Show the pusition of the uplimal risky portfolio on the CAL. (3 marks) 1 j. Supposc an investor chooses to invest 70% of his investment fund in the optimal risky portfolio and the remainder in a risk-free asset. Calculate the expected return and standard deviation of his portfolio. (4 marks)