Solution-Corporate bond fund and the stock index fund

Corporate bond fund and the stock index fund

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Reference no: EM133119192

The risk-free asset (), an S&P 500 index fund (S), and a corporate bond fund (B) have the following statistical properties:

Asset	Expected return	Risk
Risk-free asset	0.05	0.00
S&P 500 index fund	0.12	0.19
Corporate bond fund	0.055	0.10

The correlation of the returns on the corporate bond fund and the stock index fund is equal to 0.30.

Your friend Matteo currently holds a portfolio that invests $60,000 in a portfolio of risky assets that is evenly split between stocks and bonds, and $40,000 in the risk-free asset. What is the slope of the Capital Allocation Line of his current investment?

Reference no: EM133119192

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Corporate bond fund and the stock index fund

Reference no: EM133119192

Reference no: EM133119192

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