We have two assets: Stocks; Expected return 12% and SD 15% High yield bonds: Expected return 20%
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Question:
We have two assets:
Stocks; Expected return 12% and SD 15%
High yield bonds: Expected return 20% and Standard deviation 35%
Correlation between the returns of the two assets is 0.3
We can borrow and lend at Risk free rate of 2%.
Question 1:What is our optimum allocation between the two Assets?
Question 2: If we want the Standard deviation of our portfolio to be 5%; how much do we hold in cash and both portfolios to achieve the best risk return trade off?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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