you are constructing a $($risky$)$ portfolio using two Vanguard funds. The fund

VOO attempts to mimic the S&P $500($equity$),$ while VBILX is a medium

term bond fund $($debt$).$ The returns for the last five years are approximately

E$($rE $)=0\mathrm{.}14$

E$($rD$)=0\mathrm{.}05$

$\backslash$sigma E $=0\mathrm{.}18$

$\backslash$sigma D $=0\mathrm{.}07$

rf $=0\mathrm{.}02$

In addition, you know that the correlation between debt and equity is $0\mathrm{.}45.$

$($a$)$ Find the minimum variance portfolio using debt and equity.

$($b$)$ What is the expected return and standard deviation of the minimum

variance portfolio?

$($c$)$ What is the Sharpe ratio for the minimum variance portfolio?

$($d$)$ Find the optimal portfolio to maximize Sharpe ratio using debt and eq$-$

uity.

$($e$)$ What is the expected return and standard deviation of the CAL slope

maximizing portfolio?

Ted Juhl $3$

$($f$)$ Your friend has a new opportunity for you to consider. The firm Accele$-$

Rock has an aggressive portfolio with E$($rA$)=0\mathrm{.}21,\backslash$sigma A $=0\mathrm{.}29.$ Your

friend suggests that you scrap all that work you did above and put Ac$-$

celeRock as the only risky asset in your portfolio. Compare the portfolio

with AcceleRock with the best portfolio you had above $($part d$).$ Is this

a good idea? Show your work

YY