Suppose you have some money to investfor simplicity, $1and 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 Ry, suppose that R is random with mean 0.08 (8%) and standard deviation 0.07, and suppose that Rois random with mean 0.05(5%) and standard deviation 0.04. The correlation between Rs and Ry is 0.25. 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)RO Suppose that w=0.51. 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 = 0.76. 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 Ras large as possible? w= maximizes u. (Round your response to two decimal places.) What is the standard deviation of R for this value of w? o=for this value of w. (Round your response to two decimal places.) What is the value of w that minimizes the standard deviation of R? w= minimizes the standard deviation of R. (Round your response to two decimal places.) Suppose you have some money to investfor simplicity, $1and 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 Ry, suppose that R is random with mean 0.08 (8%) and standard deviation 0.07, and suppose that Rois random with mean 0.05(5%) and standard deviation 0.04. The correlation between Rs and Ry is 0.25. 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)RO Suppose that w=0.51. 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 = 0.76. 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 Ras large as possible? w= maximizes u. (Round your response to two decimal places.) What is the standard deviation of R for this value of w? o=for this value of w. (Round your response to two decimal places.) What is the value of w that minimizes the standard deviation of R? w= minimizes the standard deviation of R. (Round your response to two decimal places.)
