Suppose the Investor is based in Europe and uses euro as the currency. Expected return on MSCl equity index is 7% Expected return on bonds is 4% The risk free rate is 1% The correlation between MSCl equity index and bond is 0.3 . The expected excess return of a 60% and 40% portfolio in equity and bond is 4.9% 4.8% 4.2% None of the rest 4.6%