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anonymous
 one year ago
Suppose you have some money to investfor simplicity $1 and are planning to put a fraction w into a stock market mutual fund and the rest,1w, into a bond mutual fund. Suppose that a $1 invested in a stock fund yields Rs after one year and a $1 invested in a bond fund yields Rb. Rs and Rb are random variables with expected value of 8% and 7% respectively, and standard deviation of 7% and 4% respectively. The correlation between Rs and Rb is 0.25. If you place a fraction w of your money in the stock fund and the rest 1w in the bond fund then the return on your investment will be R=wRs+(1w)Rb
anonymous
 one year ago
Suppose you have some money to investfor simplicity $1 and are planning to put a fraction w into a stock market mutual fund and the rest,1w, into a bond mutual fund. Suppose that a $1 invested in a stock fund yields Rs after one year and a $1 invested in a bond fund yields Rb. Rs and Rb are random variables with expected value of 8% and 7% respectively, and standard deviation of 7% and 4% respectively. The correlation between Rs and Rb is 0.25. If you place a fraction w of your money in the stock fund and the rest 1w in the bond fund then the return on your investment will be R=wRs+(1w)Rb

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anonymous
 one year ago
Best ResponseYou've already chosen the best response.0a. Compute the mean and standard deviation of R for w = .5 and w = .75 respectively. b. What value of w makes the mean (or expected value) of R as large as possible? What is the standard deviation of R for this value of w? c. What is the value of w that minimizes the standard deviation of R? (you can show this using algebra, or calculus).

anonymous
 one year ago
Best ResponseYou've already chosen the best response.0Can someone please get me started on this problem, haven't taken anything like this in a while ._.
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