A financial advisor is considering three mutual funds - a stock fund, a corporate bond fund, and a T-bill money market fund that yields 8%. The expected returns of the stock and bond funds are, The correlation between the stock and bond funds is 0.21 . What is the stock fund investment proportion (weight) in the minimum variance portfolio of the two risky funds? Answer in decimal format (e.g., .45 and not 45 or 45% ). (Hint: use the standard deviations and the correlation coefficient to generate the covariance - recall correlation =>xy=Cov(X,Y)/XY). Hint 2: it is easier to use percentage terms than decimal. For example - use 30 and not 0.30 to avoid keeping up with decimal places) Question 2 1pts A financial advisor is considering three mutual funds - a stock fund, a corporate bond fund, and a T-bill money market fund that yields 8%. The expected returns of the stock and bond funds are, The correlation between the stock and bond funds is 0.10 . What is the standard deviation of the optimal risky portfolio? Hint: There are formulas for solving the weights to the optimal risky portfolio of 2 risky assets (see i.e., here). 3 However, as complicated as the formula for 2 risky stocks is - it becomes more difficult as the number of risky assets increases. A better approach, and one that is used in practice, is using computing power to optimize the Sharpe ratio (recall optimal portfolio is the one with the highest Sharpe ratio). The how-to video in this module, "Capital Allocation Line and the Sharpe Ratio," illustrates how to use Excel's solver function to find the optimal portfolio. The solver function can also be used to optimize portfolios of more than 2 risky assets ( see here ) Answer in percentage form without the % sign. Question 3 1 pts A financial advisor is considering three mutual funds - a stock fund, a corporate bond fund, and a T-bill money market fund that yields 8%. The expected returns of the stock and bond funds are, The correlation between the stock and bond funds is 0.10 . Suppose a client requires an expected portfolio return of 14% and that it be efficient. What is the proportion invested in in the money market fund? Hint: Combine the optimal portfolio from the previous question (it is efficient - the most efficient) with the money market fund to get weights such that the expected return is 14%. Answer in percentage form without the % sign