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Your uncle has $2,000 invested in corporate bonds with an expected return of 9% and a standard deviation of 9%. His financial adviser suggested that
Your uncle has $2,000 invested in corporate bonds with an expected return of 9% and a standard deviation of 9%. His financial adviser suggested that he should move his money into an Index fund that tracks the Russell 2000, which has an expected return of 15% and a standard deviation of 16%. How could your uncle invest his money in some combination of that Index fund and risk-free T-bills that would increase his expected return without increasing his standard deviation? Assume the risk-free rate is 2%.
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