Suppose that in Problem 5.16 you wanted to create a portfolio that consists of the corporate bond fund and the common stock fund. Compute the portfolio expected return and portfolio risk for each of the following situations:
a. $300 in the corporate bond fund and $700 in the common stock fund.
b. $500 in each fund.
c. $700 in the corporate bond fund and $300 in the common stock fund.
d. On the basis of the results of (a) through (c), which portfolio would you recommend? Explain.
In problem

Economic Probability Condition Corporate Common Bond Fund Stock Fund 0.01 Extreme recession 0.09 0.15 Stagnation 0.35 Slow growth 0.30 0.10 High growth 200 -70 30 80 100 120 -999 -300 -100 100 150 350 Recession Moderate growth