The economy is showing steady growth GDP increased during the first quarter of the year by .85%. Inflation as measurd by the Consumer Price Index is at .85 percent for the year, which have been below historic levels, are gradually increasing. The expected rate of rturn on the 90-day treasury bill is 3%. The expected market return as measured by the S&P is 11% and the standard deviation of the s&P is 21%.
You are the investment manager you have three assests. Treasury Bills, Carclays corporate bond fund, and Large Capt Stock. Bond Fund: Expected return is 6% and standard deviation is 9%
Stock Fund: expected return is 11% and standard deviation is 19%
The correlation betwn the returns of the stock and bond funds is 0.22.
A) Calculate the covariance between the bond fund and the stock fund.
b) Calculate the covariance between the treasury bills and the stock fund.
You've decided that your going to put 15% in treasury bills
35% in the bond fund, and 50% in the stock fund
C) What is th expected return of the portfolio?
D) What is the standard deviation of it's rate of return?