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MATLAB: An Introduction with Applications
6th Edition
ISBN: 9781119256830
Author: Amos Gilat
Publisher: John Wiley & Sons Inc
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
Transcribed Image Text:J. P. Morgan Asset Management publishes information about financial investments. Between 2002 and 2011 the expected return for the S&P 500 was 5.04%
with a standard deviation of 19.45% and the expected return over that same period for a Core Bonds fund was 5.78% with a standard deviation of 2.13% (J. P.
Morgan Asset Management, Guide to the Markets). The publication also reported that the correlation between the S&P 500 and Core Bonds is -0.32. You are
considering portfolio investments that are composed of an S&P 500 index fund and a Core Bonds fund.
a. Using the information provided, determine the covariance between the S&P 500 and Core Bonds. Round your answer to two decimal places. If required enter
negative values as negative numbers.
b. Construct a portfolio that is 50% invested in an S&P 500 index fund and 50% in a Core Bond fund. Let x represent the S&P 500 and y represent the Core
Bond fund. Round your answers to one decimal place.
r 3=
In percentage terms, what is the expected return and standard deviation for such a portfolio? Round your answers to two decimal places.
Expected return
%
Standard deviation
c. Construct a portfolio that is 20% invested in an S&P 500 index fund and 80% invested in a Core bond fund. Let x represent the S&P 500 and y represent the
Core Bond fund. Round your answers to one decimal place.
r =
In percentage terms, what is the expected return and standard deviation for such a portfolio? Round your answers to two decimal places.
Expected return
Standard deviation
%
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