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You are trying to decide whether to buy Banguards Equity Fund and/or its Bond Fund. For next year, you have identified several possible scenarios to

You are trying to decide whether to buy Banguards Equity Fund and/or its Bond Fund. For next year, you have identified several possible scenarios to which you have assigned probabilities. You have also estimated expected returns for the two funds for each scenario. Your spreadsheet looks like the following.

Stock Fund Bond Fund
Scenario Probability Return% Return%
Recession 0.15 -18.00 13.00
Weak Economy 0.05 7.00 4.00
Average Economy 0.60 10.0 6.00
Strong Economy 0.20 28.00 -9.00

Calculate the expected returns, variances, and standard deviations of the different portfolio combinations described in the table below. Make sure you enter the full number. For example, if the return you estimated for a single portfolio is 0.7%, you should enter 0.7.

w1 = Weight of Stock Fund

w2 = Weight of Bond Fund

Portfolios Exp Return%

Standard Deviation%

0.10

0.90

Answer

Answer

0.20

0.80

Answer

Answer

0.30

0.70

Answer

Answer

0.40

0.60

Answer

Answer

0.50

0.50

Answer

Answer

0.60

0.40

Answer

Answer

0.70

0.30

Answer

Answer

0.80

0.20

Answer

Answer

0.90

0.10

Answer

Answer

The Minimum Variance Portfolio consists of:

Weight of Stock Fund=Answer

Weight of Bond Fund=Answer

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