Question
You are trying to build the best possible risky portfolio for your investment clients. You have two risky assets available to you: A risky stock
You are trying to build the best possible risky portfolio for your investment clients. You have two risky assets available to you: A risky stock with an expected excess return of 0.297 and a standard deviation of 0.94, and a risky bond with an expected excess return of 0.036, and a standard deviation of 0.887. If these two assets have a coefficient of correlation of 0.81, what proportion of the money you invest in risky assets should you put in the bond? An answer of 0 means invest no money in the bond, an answer of 1 means put all of your money in the bond. Please give your answer to three decimal places.
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