Answered step by step
Verified Expert Solution
Question
1 Approved Answer
There are three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market
There are three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows: (Risk free rate 8%)
Expected Return | Standard Deviation | ||
Stock fund (S) | 18% | 37% | |
Bond fund (B) | 14% | 19% | |
The correlation between the fund returns is 0.11. |
a) What are the proportions of the optimal risky portfolio invested in Stock Fund and Bond Fund in , Ws and WB? Also, what are the mean and standard deviation (rks) of the portfolio, E(rp) and sp ?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started