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Suppose you have some money to invest-for simplicity, $1-and you are planning to put a fraction w into a stock market mutual fund and
Suppose you have some money to invest-for simplicity, $1-and you 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 $1 invested in a stock fund yields R, after 1 year and that $1 invested in a bond fund yields R, suppose that R, is random with mean 0.08 (8%) and standard deviation 0.07, and suppose that R., is random with mean 0.05 (5%) and standard deviation 0.04. The correlation between R, and R, is 0.27. 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 is R=wR, +(1-w)R Suppose that w=0.53. Compute the mean and standard deviation of R The mean is (Round your response to three decimal places.) The standard deviation is (Round your response to three decimal places.) Suppose that w=0.8. Compute the mean and standard deviation of R The mean is (Round your response to three decimal places.) The standard deviation is (Round your response to three decimal places.) What value of w makes the mean of R as large as possible? wmaximizes (Round your response to two decimal places.) What is the standard deviation of R for this value of w? for the value of w. (Round your response to two decimal places.) What is the value of w that minimizes the standard deviation of R? wminimizes the standard deviation of Ft. (Round your response to two decimal places)
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