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You have $10,000 to invest in a combination of a risk-free asset (f), an S&P 500 index fund (S), and a corporate bond fund (B) with the following properties: Expected return Risk Asset Risk-free asset S&P 500 index fund 0.05 0.12 0.00 0.19 Corporate bond fund 0.055 The correlation of the returns on the corporate bond fund and the stock index fund is equal to 0.30. Select which portfolio below is closest to the tangency portfolio. Group of answer choices 0.10 None of these portfolios can be the tangency portfolio, as the tangency portfolio combines both risk-free and risky assets 60% invested in S and 40% in B (assume that the risk of this portfolio is 0.1317) 90% invested in S and 10% invested in B (Assume that the risk of this portfolio is 0.1743) 20% invested in S and 80% invested in B (Assume that the risk of this portfolio is 0.0983) 30% invested in S and 70% invested in B (Assume that the risk of this portfolio is 0.1027)

You have $10,000 to invest in a combination of a risk-free asset (f), an S&P 500 index fund (S), and a corporate bond fund (B) with the following properties: Expected return Risk Asset Risk-free asset S&P 500 index fund 0.05 0.12 0.00 0.19 Corporate bond fund 0.055 The correlation of the returns on the corporate bond fund and the stock index fund is equal to 0.30. Select which portfolio below is closest to the tangency portfolio. Group of answer choices 0.10 None of these portfolios can be the tangency portfolio, as the tangency portfolio combines both risk-free and risky assets 60% invested in S and 40% in B (assume that the risk of this portfolio is 0.1317) 90% invested in S and 10% invested in B (Assume that the risk of this portfolio is 0.1743) 20% invested in S and 80% invested in B (Assume that the risk of this portfolio is 0.0983) 30% invested in S and 70% invested in B (Assume that the risk of this portfolio is 0.1027)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You have $10,000 to invest in a combination of a risk-free asset (f), an S&P 500 index fund (S), and a corporate bond fund (B) with the following properties: Expected return Risk Asset Risk-free asset S&P 500 index fund 0.05 0.12 0.00 0.19 Corporate bond fund 0.055 The correlation of the returns on the corporate bond fund and the stock index fund is equal to 0.30. Select which portfolio below is closest to the tangency portfolio. Group of answer choices 0.10 None of these portfolios can be the tangency portfolio, as the tangency portfolio combines both risk-free and risky assets 60% invested in S and 40% in B (assume that the risk of this portfolio is 0.1317) 90% invested in S and 10% invested in B (Assume that the risk of this portfolio is 0.1743) 20% invested in S and 80% invested in B (Assume that the risk of this portfolio is 0.0983) 30% invested in S and 70% invested in B (Assume that the risk of this portfolio is 0.1027)
Transcribed Image Text:You have $10,000 to invest in a combination of a risk-free asset (f), an S&P 500 index fund (S), and a corporate bond fund (B) with the following properties: Expected return Risk Asset Risk-free asset S&P 500 index fund 0.05 0.12 0.00 0.19 Corporate bond fund 0.055 The correlation of the returns on the corporate bond fund and the stock index fund is equal to 0.30. Select which portfolio below is closest to the tangency portfolio. Group of answer choices 0.10 None of these portfolios can be the tangency portfolio, as the tangency portfolio combines both risk-free and risky assets 60% invested in S and 40% in B (assume that the risk of this portfolio is 0.1317) 90% invested in S and 10% invested in B (Assume that the risk of this portfolio is 0.1743) 20% invested in S and 80% invested in B (Assume that the risk of this portfolio is 0.0983) 30% invested in S and 70% invested in B (Assume that the risk of this portfolio is 0.1027)
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