Q3. Portfolio Returns (20 points) Page 4 i. stock has mean of 8% and stdev...
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Q3. Portfolio Returns (20 points) Page 4 i. stock has mean of 8% and stdev of 18%; ii bond has mean of 6% and stdev of 12%; iii correlation b/w stock and bond of -0.4; iv. Risk free rate for cash lending and borrowing is at 2%.
a. What is the mean and stdev of a portfolio of that is 60% in stock and 40% in bond?
b. What is the mean and stdev of a fully invested yet unleveraged portfolio in stock and bond, that assign weights based on inverse of VARIANCE risk
c. How do you combine portfolio in Q3b with cash to match mean return in Q3a portfolio? What is your cash position? What is the stdev risk of this portfolio?
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