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Using the graph of the opportunity set of risky assets created in Problem #5, answer the following: a) Change the correlation of stocks and bonds
Using the graph of the opportunity set of risky assets created in Problem #5, answer the following:
a) Change the correlation of stocks and bonds back to 0.25 and observe the shape of the efficient frontier.
Starting at the point that corresponds to 100% Bonds & 0% Stocks, describe what happens to portfolio risk and return as you increase the stock allocation and decrease the bond allocation? Why is this happening?
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