Problem 3 Suppose that the S P 500 index has an expected return of 15 and a standard deviation of returns of 25 The risk free rate is 3 What is the weight in the S P 500 of the portfolio on the Capital Allocation Line (CAL) that has an expected return of 20 Problem 4 Comment on whether the following sentence is true or false, and motivate your answer When investing in bonds, we should invest in bonds with higher Yields To Maturity (YT M) because they give higher expected returns Problem 5 There are three assets which we label 1,2,3 with excess returns, respectively, of $ 4, $4 and $ 8 The Variance Covariance matrix is 2 1 0 E 1 2 1 0 1 2 Denote the return of asset 'i' by 1

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Problem 3  Suppose that the S P 500 index has an expected return of 15  and a standard deviation of returns of 25   The risk free rate is 3   What is the weight in the S P 500 of the portfolio on the Capital Allocation Line (CAL) that has an expected return of 20   Problem 4  Comment on whether the following sentence is true or false, and motivate your answer    When investing in bonds, we should invest in bonds with higher Yields To Maturity (YT M) because they give higher expected returns   Problem 5  There are three assets   which we label 1,2,3  with excess returns, respectively, of $ 4, $4 and $ 8  The Variance Covariance matrix is 2 1 0 E    1 2 1 0 1 2 Denote the return of asset 'i' by 1

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Question: Problem 3: Suppose that the S&P 500 index has an expected return of 15% and a standard deviation of returns of 25%. The risk-free rate

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