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You have the following choices to invest $100,000: Bond Fund(#1) Stock Fund(#2) Expected Return 7% 12% Standard Deviation 10% 15% Correlation (bond fund, stock fund)

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You have the following choices to invest $100,000: Bond Fund(#1) Stock Fund(#2) Expected Return 7% 12% Standard Deviation 10% 15% Correlation (bond fund, stock fund) = 0 a) What are the dollar investments in each fund if you choose to invest in the minimum risk portfolio? b) What is the expected return if you invested the entire $100,000 in the minimum risk portfolio? c) Should you consider investing $75,000 each in the Bond Fund and $25,000 in the Stock Fund? Explain Clearly. d) If the risk free rate (borrowing or lending) is 4 percent, and the optimal portfolio weights are PC.46, .54) what is the expected return of the optimal portfolio? e) If you choose to invest part of your money in the risk-free rate, What are the dollar amounts that must be invested in the risk-free rate, the bond fund and the stock fund in order to earn the same return as the minimum risk portfolio? f) Will the investment in part (e) above have a higher or lower risk than that of the minimum-risk portfolio? You have the following choices to invest $100,000: Bond Fund(#1) Stock Fund(#2) Expected Return 7% 12% Standard Deviation 10% 15% Correlation (bond fund, stock fund) = 0 a) What are the dollar investments in each fund if you choose to invest in the minimum risk portfolio? b) What is the expected return if you invested the entire $100,000 in the minimum risk portfolio? c) Should you consider investing $75,000 each in the Bond Fund and $25,000 in the Stock Fund? Explain Clearly. d) If the risk free rate (borrowing or lending) is 4 percent, and the optimal portfolio weights are PC.46, .54) what is the expected return of the optimal portfolio? e) If you choose to invest part of your money in the risk-free rate, What are the dollar amounts that must be invested in the risk-free rate, the bond fund and the stock fund in order to earn the same return as the minimum risk portfolio? f) Will the investment in part (e) above have a higher or lower risk than that of the minimum-risk portfolio

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