Chapter 6, Problem 8PS

Summary Introduction

(a)

To examine:

The expected return and standard deviation for the mutual fund comprised of stock fund and bond fund in the proportions of $0\%$ to $100\%$ in increment of $20\%$ .

Introduction:

Expected return: It is the gain or loss to an investor which is expected on an investment and known as expected rate of return.

Standard deviation: It is historical volatility. It's applied to the annual rate of return to quantify the investment volatility.

Summary Introduction

(b)

To draw:

The table and graph showing expected return and standard deviation for the investment opportunity set of the two risky funds i.e. Stock fund and Bond fund.

Introduction:

Expected return: It is the gain or loss to an investor which is expected on an investment and known as expected rate of return.

Standard deviation: It is historical volatility. It's applied to the annual rate of return to quantify the investment volatility.