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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Suppose that in Problem 5.16 you wanted to create a portfolio that consists of a corporate bond fund and a common stock fund. Compute the portfolio expected return and portfolio risk for each of the following percentages invested in a corporate bond fund:
a. 30%
b. 50%
c. 70%
d. On the basis of the results of (a) through (c), which portfolio would you recommend? Explain.
Problem 5.16:
You are trying to set up a portfolio that consists of a corporate bond fund and a common stock fund. The following information about the annual return (per $1,000) of each of these investments under different economic conditions is available, along with the probability that each of these economic conditions will occur:

Compute the
a. expected return for the corporate bond fund and for the common stock fund.
b. standard deviation for the corporate bond fund and for the common stock fund.
c. covariance of the corporate bond fund and the common stock fund.
d. Would you invest in the corporate bond fund or the common stock fund? Explain.
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