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Suppose you have some money to invest-for simplicity, $1-and are planning to put a fraction w into a stock market mutual fund and the rest,

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Suppose you have some money to invest-for simplicity, $1-and are planning to put a fraction w into a stock market mutual fund and the rest, 1-w, into a bond mutual fund. Suppose that a $1 invested in a stock invested in a stock fund yields R_s after one year and a $1 invested in a bond fund yields R_b. R_s are random variables with expected value of 9 percent and 7 percent respectively, and standard deviation of 4 percent and 2 percent respectively. The correlation between R_s and R_b is 0.75 If you place a fraction w of your money in the stock fund and the rest, 1-w, in the bond fund then the return on your investment will be R= wR_3 + (1-w)R_b. The risk associated with your investment is measured by the standard deviation. If you decide to invest 60 percent of your $1 in stock and the rest in bond, then what is the expected return of your investment? What is its associated risk? What share of your $1 money should you invest in stock in order to except a 8.6% return of your investment ? For that same share i.e invested in stock, what level of risk is associated with your investment? What share of your $1 money should you investment in stock mutual fund in order for your investment risk to be 3%

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