You are a risk averse investor and want portfolio with the minimum amount of risk. You plan
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Question:
You are a risk averse investor and want portfolio with the minimum amount of risk. You plan to construct your portfolio with an Equity ETF (ETFE) and a Bond ETF (ETFB). You chose these ETFs because the correlation between the two securities is -1.0. ETFE has an expected rate of return of 14% and a standard deviation of 28%. ETFB has an expected rate of return of 6% and a standard deviation of 12%.
How much of the portfolio in percentage terms would you put into each Security to construct the minimum risk portfolio?
What is the standard deviation of the minimum risk portfolio?
What is the expected rate of return of the portfolio?
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