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 R₂ after 1 year and that $1 invested in a bond fund yields R. suppose that R, is random with mean 0.08 (8%) and standard deviation 0.07, and suppose that R, is random with mean 0.05 (5%) and standard deviation 0.04. The correlation between R and R, is 0.25. 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=wR₂ + (1-w)Rp Suppose that w = 0.51. 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 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 R₂ after 1 year and that $1 invested in a bond fund yields R. suppose that R, is random with mean 0.08 (8%) and standard deviation 0.07, and suppose that R, is random with mean 0.05 (5%) and standard deviation 0.04. The correlation between R and R, is 0.25. 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=wR₂ + (1-w)Rp Suppose that w = 0.51. 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.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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