Question

Given the following information about a stock fund S and a bond fund B E(rS) =...

Given the following information about a stock fund S and a bond fund B

E(rS) = 15%,                 sS = 35%,

E(rB) = 9%,                   sB = 23%,             r = 0.15,          Rf = 5.5%

a. Calculate the risk (s) of a portfolio made of 60% invested in the stock fund and 40% in the bond fund call this new portfolio L

b. Calculate the weights of the minimum variance portfolio. Is there any benefit from diversification? Explain.

c. If the correlation coefficient was r =-1 would portfolio the portfolio be more attractive . Explain

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this question is related to computation of risk of portfolio .

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