You are considering how to allocate your fund between the following two indices: an equity index (E) and a government bond index (D). The expected rate of return is 15% and the standard deviation of return is 20% for the equity index, E. The expected rate of return is 6% and the standard deviation of return is 10% for the government bond index, D. The return correlation between the two indices, E and D, is 0.50.
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