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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 S1 invested in a stock fund yields Rg after 1 year and that $1 invested in a bond fund yields R,, suppose that Rs is random with mean 0.07 (7%) and standard deviation 0.06, and suppose that R, is random with mean 0.04 (4%) and standard deviation 0.04. The correlation between R, and R, is 0.22. If you place a fraction w of your money in the stock fund and the rest, 1 - w, in the bond fund, then the return on your investment is R= wRs + (1- w)Rn. Suppose that w= 0.44. Compute the mean and standard deviation of R. The mean is |- (Round your response to three decimal places.) The standard deviation is . (Round your response to three decimal places.) Suppose that w= 0.66. Compute the mean and standard deviation of R. The mean is |- (Round your response to three decimal places.) The standard deviation is. (Round your response to three decimal places.) What value of w makes the mean of R as large as possible? w = maximizes u. (Round your response to two decimal places.) What is the standard deviation of R for this value of w? for this value of w. (Round your response to two decimal places.) What is the value of w that minimizes the standard deviation of R? w = minimizes the standard deviation of R. (Round your response to two decimal places.)

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 S1 invested in a stock fund yields Rg after 1 year and that $1 invested in a bond fund yields R,, suppose that Rs is random with mean 0.07 (7%) and standard deviation 0.06, and suppose that R, is random with mean 0.04 (4%) and standard deviation 0.04. The correlation between R, and R, is 0.22. If you place a fraction w of your money in the stock fund and the rest, 1 - w, in the bond fund, then the return on your investment is R= wRs + (1- w)Rn. Suppose that w= 0.44. Compute the mean and standard deviation of R. The mean is |- (Round your response to three decimal places.) The standard deviation is . (Round your response to three decimal places.) Suppose that w= 0.66. Compute the mean and standard deviation of R. The mean is |- (Round your response to three decimal places.) The standard deviation is. (Round your response to three decimal places.) What value of w makes the mean of R as large as possible? w = maximizes u. (Round your response to two decimal places.) What is the standard deviation of R for this value of w? for this value of w. (Round your response to two decimal places.) What is the value of w that minimizes the standard deviation of R? w = minimizes the standard deviation of R. (Round your response to two decimal places.)

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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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 S1 invested in a stock fund yields Rg after 1 year and that $1 invested in a bond fund yields R,, suppose that Rs is random with mean 0.07 (7%) and standard deviation 0.06, and suppose that R, is random with mean 0.04 (4%) and standard deviation 0.04. The correlation between R, and R, is 0.22. If you place a fraction w of your money in the stock fund and the rest, 1 - w, in the bond fund, then the return on your investment is R= wRs + (1- w)Rn. Suppose that w= 0.44. Compute the mean and standard deviation of R. The mean is |- (Round your response to three decimal places.) The standard deviation is . (Round your response to three decimal places.) Suppose that w = 0.66. Compute the mean and standard deviation of R. The mean is |- (Round your response to three decimal places.) The standard deviation is. (Round your response to three decimal places.) What value of w makes the mean of R as large as possible? w = maximizes u. (Round your response to two decimal places.) What is the standard deviation of R for this value of w? for this value of w. (Round your response to two decimal places.) What is the value of w that minimizes the standard deviation of R? w = minimizes the standard deviation of R. (Round your response to two decimal places.)
Transcribed Image Text: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 S1 invested in a stock fund yields Rg after 1 year and that $1 invested in a bond fund yields R,, suppose that Rs is random with mean 0.07 (7%) and standard deviation 0.06, and suppose that R, is random with mean 0.04 (4%) and standard deviation 0.04. The correlation between R, and R, is 0.22. If you place a fraction w of your money in the stock fund and the rest, 1 - w, in the bond fund, then the return on your investment is R= wRs + (1- w)Rn. Suppose that w= 0.44. Compute the mean and standard deviation of R. The mean is |- (Round your response to three decimal places.) The standard deviation is . (Round your response to three decimal places.) Suppose that w = 0.66. Compute the mean and standard deviation of R. The mean is |- (Round your response to three decimal places.) The standard deviation is. (Round your response to three decimal places.) What value of w makes the mean of R as large as possible? w = maximizes u. (Round your response to two decimal places.) What is the standard deviation of R for this value of w? for this value of w. (Round your response to two decimal places.) What is the value of w that minimizes the standard deviation of R? w = minimizes the standard deviation of R. (Round your response to two decimal places.)
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