• anonymous
Suppose you have some money to invest = for simplicity, $1 - and you are planning to put a fraction w into a stock market mutual fund and the rest , 1- w, into a bond mutual fund. Suppose that $1 invested in a stock fund yields Rs after 1 year and that $1 invested in a bond fund yields Rb, suppose that Rb is random with means 0.05 (5%) and standard deviation 0.04. The correlation between Rs and Rb is 0.25. If you place a fraction w of your money in the stock market and the rest, 1 - w, in the bond fund, then the return on your investment is R= wRs + (1 - w)Rb.
  • schrodinger
See more answers at
At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga. Et harum quidem rerum facilis est et expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi optio cumque nihil impedit quo minus id quod maxime placeat facere possimus, omnis voluptas assumenda est, omnis dolor repellendus. Itaque earum rerum hic tenetur a sapiente delectus, ut aut reiciendis voluptatibus maiores alias consequatur aut perferendis doloribus asperiores repellat.

Get this expert

answer on brainly


Get your free account and access expert answers to this
and thousands of other questions

  • anonymous
A. Suppose that w = 0.5. COmputer the mean and stdv. of R. B. Suppose that w = .75. COmputer the mean and stdv of R. C. What value of w makes the mean of R as large as possible? What is the standard deviation of R for this value of w? D. What is the value of w that minimizes the standard deviation of R?
  • tkhunny
No, that may describe the DISTRIBUTION of your potential investment, but it is not "the investment". Okay, let's see your work.
  • anonymous
First immediate question, is what does the correlation mean?... maybe obvious sorry if it is.

Looking for something else?

Not the answer you are looking for? Search for more explanations.