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US Stock Index (Fund S) US Bond Index (Fund B) T-Bill Expected Return 20% 9% 1% Standard Deviation 22% 12% Variance 0.0484 0.0144 rS,B 0.40
| US Stock Index (Fund S) | US Bond Index (Fund B) | T-Bill |
Expected Return | 20% | 9% | 1% |
Standard Deviation | 22% | 12% |
|
Variance | 0.0484 | 0.0144 |
|
rS,B | 0.40 |
| |
Covariance (S,B) | 0.01056 |
|
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- Calculate the weights for stocks and bonds for the Optimal Risky Portfolio. Show your work.
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- Calculate:
- the expected return for the Optimal Risky Portfolio;
- the standard deviation for the Optimal Risky Portfolio; and
- the ratio the Optimal Risky Portfolio maximizes (i.e., the ratio that makes it the optimal portfolio)
- Calculate:
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