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Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the

Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 28% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 6%.

 

Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as follows: (Leave no cells blank - be certain to enter "0" wherever required. Do not enter your answer as a percentage but in a decimal format. Round "Expected Return" to 4 decimal places and the "Variance" to 4 decimal places.)

 

WBills

WIndex

Expected Return

Variance

 

0.6

0.4

0.0920

0.0125

  Example

0.8

0.2

     

0.4

0.6

     

1.0

0.0

     

0.0

1.0

     

0.2

0.8

     
 

Apr 11 2020 View more View Less

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