The following table presents the performance of stock and bond funds under various scenarios.
a. Calculate the expected returns, standard deviations, correlation coefficient of the stock and bond funds.
b. Suppose an investor forms a portfolio with stocks and bonds. Find the investment opportunity set in differing proportions.
c. Draw the investment opportunity set.
Homework Answers
Formulas used :-
Exp. Return =SUMPRODUCT($N$469:$N$472,O469:O472)
Standard Deviation=SUMPRODUCT((O477:O480)^2,$N$469:$N$472)^(1/2)
Covariance=SUMPRODUCT(O477:O480,P477:P480,N469:N472)
Correlation=O483/(O481*P481)
Formulas used:-
Expected Return on Portfolio=(C29*$D$22)+(D29*$E$22)
Volatility on Portfolio=((C29^2*$D$23^2)+(D29^2*$E$23^2)+(2*$D$24*C29*D29))^(1/2)
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The following table presents the performance of stock and bondfunds under various scenarios.
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