Suppose you have some money to invest - for simplicity, $1 - and you are planning to put a fraction w into a stock marke

Business, Finance, Economics, Accounting, Operations Management, Computer Science, Electrical Engineering, Mechanical Engineering, Civil Engineering, Chemical Engineering, Algebra, Precalculus, Statistics and Probabilty, Advanced Math, Physics, Chemistry, Biology, Nursing, Psychology, Certifications, Tests, Prep, and more.
Post Reply
answerhappygod
Site Admin
Posts: 899559
Joined: Mon Aug 02, 2021 8:13 am

Suppose you have some money to invest - for simplicity, $1 - and you are planning to put a fraction w into a stock marke

Post by answerhappygod »

Suppose you have some money to invest - for simplicity, $1 - and
you are planning to put a fraction w into a stock market mutual
fund and the rest, 1 - w, into a bond mutual fund. Suppose that $1
invested in a stock fund yields Rs after 1 year and that $1
invested in a bond yields Rb, suppose that Rs is random with mean
0.07 (7%) and standard deviation 0.06, and supposed Rb is random
with mean w of your money in the stock fund and the rest, 1 -w, in
the bond fund, then the return on your investment is R = wRs +
(1-w)Rb.
Suppose that w = 0.44. Compute the mean and standard
deviation of R.
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!
Post Reply