J.P. Morgan Asset Management publishes information about financial investments. Over the past 10 years, the expected return for a core bonds fund was 5.78% with a standard deviation of 2.13%.† J.P. Morgan Asset Management also reported that the expected return for real estate investment trusts (REITs) was 13.07% with a standard deviation of 23.17%. The correlation between core bonds and REITs is −0.04. (Past performance is no guarantee of future results.)
J.P. Morgan Asset Management publishes information about financial investments. Over the past 10 years, the expected return for a core bonds fund was 5.78% with a standard deviation of 2.13%.†
J.P. Morgan Asset Management also reported that the expected return for real estate investment trusts (REITs) was 13.07% with a standard deviation of 23.17%. The
You are considering portfolio investments that are composed of a core bonds fund and REITs.
a. Using the information provided, determine the
covariance =
b. Construct a portfolio that is 50% invested in a core bonds fund and 50% invested in REITs. In percentage terms, what are the expected return and standard deviation for such a portfolio? (Round your answer for the standard deviation to two decimal places.)
expected return =
standard deviation =
c. Construct a portfolio that is 75% invested in a core bonds fund and 25% invested in REITs. In percentage terms, what are the expected return and standard deviation for such a portfolio? (Round your answer for the standard deviation to two decimal places.)
expected return =
standard deviation =
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