Answer Happy

J.P. Morgan Asset Management publishes information about financial investments. Over the past 10 years, the expected return for the S&P 500 was 5.04% with a standard deviation of 19.45% and the expected return over that same period for a core bonds fund was 5.78% with a standard deviation of 2.13%.+ The publication also reported that the correlation between the S&P 500 and core bonds is -0.32. J.P. Morgan Asset Management also reported that the expected return for real estate investment trusts (REITS) was 13.07% with a standard deviation of 23.17%. The correlation between the S&P 500 and REITS is 0.74 and the correlation between core bonds and REITS is -0.04. (Past performance is no guarantee of future results.) You are considering portfolio investments that are composed of an S&P 500 index fund and REITS as well as portfolio investments composed of a core bonds fund and REITS. (a) Using the information provided, determine the covariance between the S&P 500 and REITS and between core bonds and REITS. (Round your answers to three decimal places.) S&P 500 and REITS core bonds and REITS (b) Construct a portfolio that is 50% invested in an S&P 500 fund and 50% invested in REITS. In percentage terms, what are the expected return and standard deviation for such a portfolio? (Round your answer for the standard deviation to two decimal places.) expected return standard deviation (c) Construct a portfolio that is 50% invested in a core bonds fund and 50% invested in REITs. In percentage terms, what are the expected return and standard deviation for such a portfolio? (Round your answer for the standard deviation to two decimal places.) expected return standard deviation % % expected return standard deviation % % (d) Construct a portfolio that is 65% invested in a core bonds fund and 35% invested in REITs. In percentage terms, what are the expected return and standard deviation for such a portfolio? (Round your answer for the standard deviation to two decimal places.) % % (e) Which of the portfolios in parts (b), (c), and (d) would you recommend to an aggressive investor? Why? The portfolio consisting of -Select--- Which would you recommend to a conservative investor? Why? The portfolio consisting of ---Select--- ✓ is recommended for the aggressive investor because of its --Select--- return and moderate amount of risk. ✓is recommended to the conservative investor because of its moderate return and -Select--- risk.