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There are two asset classes: stocks and bonds. The expected return to stocks is 12% with a standard deviation of 22%. The expected return to
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There are two asset classes: stocks and bonds. The expected return to stocks is 12% with a standard deviation of 22%. The expected return to bonds is 5% with a standard deviation of 8%. The correlation between stocks and bonds is 0.80. Assume your utility function is given by: U = E(r) 2.52. Given no constraints on investing in stocks or bonds, your utility is highest in which of the following portfolios?
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