An investment group offers their clients advice on creating a diversified investment portfolio. A client asks...
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An investment group offers their clients advice on creating a diversified investment portfolio. A client asks them to develop a portfolio that includes Investment in a Domestic Growth Fund (a mutual fund composed of US stocks with a history of strong performance) and a corporate bond fund. The Domestic Growth Fund has an expected return of 7.80% with a standard deviation of 18.45%. The corporate bond fund has an expected percent return of 5.75% with a standard deviation of 4.80%. The covariance of an investment in the Domestic Growth Fund with an investment in a corporate bond fund is -12.6. (Round your answers for standard deviation to two decimal places.) (a) Which of the funds would be considered the more risky? Why? The Domestic Growth Fund would be considered more risky because it has a larger expected percent return. The Domestic Growth Fund would be considered more risky because it has a larger standard deviation. Neither fund is risky since both are equivalent. The corporate bond fund would be considered more risky because it has a smaller expected percent return. The corporate bond fund would be considered more risky because it has a smaller standard deviation. (b) If the investment group recommends that the client invest 75% in the Domestic Growth Fund and 25% in the corporate bond fund, what is the expected percent return and standard deviation for such a portfolio? expected percent return % (Do not round) standard deviation What would be the expected return and standard deviation, in dollars, for a client Investing $40,000 in such a portfolio? expected return $ standard deviation $ % (Round to 2 decimal places) (Round to the nearest dollar, and do NOT include the original $40,000 investment amount) (Round to the nearest dollar) (c) If the investment group recommends that the client invest 25% in the Domestic Growth Fund and 75% in the corporate bond fund, what is the expected return and standard deviation for such a portfolio? expected percent return standard deviation % (Do not round) % (Round to 2 decimal places) What would be the expected return and standard deviation, in dollars, for a client investing $40,000 in such a portfolio? expected return (Round to the nearest dollar, and do NOT include the original $40,000 investment amount) An investment group offers their clients advice on creating a diversified investment portfolio. A client asks them to develop a portfolio that includes Investment in a Domestic Growth Fund (a mutual fund composed of US stocks with a history of strong performance) and a corporate bond fund. The Domestic Growth Fund has an expected return of 7.80% with a standard deviation of 18.45%. The corporate bond fund has an expected percent return of 5.75% with a standard deviation of 4.80%. The covariance of an investment in the Domestic Growth Fund with an investment in a corporate bond fund is -12.6. (Round your answers for standard deviation to two decimal places.) (a) Which of the funds would be considered the more risky? Why? The Domestic Growth Fund would be considered more risky because it has a larger expected percent return. The Domestic Growth Fund would be considered more risky because it has a larger standard deviation. Neither fund is risky since both are equivalent. The corporate bond fund would be considered more risky because it has a smaller expected percent return. The corporate bond fund would be considered more risky because it has a smaller standard deviation. (b) If the investment group recommends that the client invest 75% in the Domestic Growth Fund and 25% in the corporate bond fund, what is the expected percent return and standard deviation for such a portfolio? expected percent return % (Do not round) standard deviation What would be the expected return and standard deviation, in dollars, for a client Investing $40,000 in such a portfolio? expected return $ standard deviation $ % (Round to 2 decimal places) (Round to the nearest dollar, and do NOT include the original $40,000 investment amount) (Round to the nearest dollar) (c) If the investment group recommends that the client invest 25% in the Domestic Growth Fund and 75% in the corporate bond fund, what is the expected return and standard deviation for such a portfolio? expected percent return standard deviation % (Do not round) % (Round to 2 decimal places) What would be the expected return and standard deviation, in dollars, for a client investing $40,000 in such a portfolio? expected return (Round to the nearest dollar, and do NOT include the original $40,000 investment amount)
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a The Domestic Growth Fund would be considered more risky because it has a larger standard deviation ... View the full answer
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