You invest 50% of your financial assets in the Vanguard Total Stock Market ETF (VTI) and 50%

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Question:

You invest 50% of your financial assets in the Vanguard Total Stock Market ETF (VTI) and 50% in the Vanguard Total Bond Market ETF (BND). VTI has an expected return of 8% and a standard deviation of 16%. BND has an expected return of 5% and a standard deviation of 10%. The correlation between the returns of the two investments is 0.2. The risk-free rate is 4%.

a. Briefly explain the investment strategies of VTI and BND.

b. What are the expected return, the standard deviation, and the Sharpe ratio of your portfolio? Show the mathematical equations that you use to computethese measures.