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What is the investment proportion in the MVP

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Question -

Task 1 - You invest in a 5-year bond with the face value F=1000USD, coupon rate c = 6% p.a., and price rate p = 97.5%, when the coupons are paid every year (discrete model). What is the value of your capital after 5 years?

Task 2 - Compute YTM of a portfolio that consits of:

a) 500 bonds A (face value is 100, maturity is 2 years, coupon rate is 8%, price is 102% of face value),

b) 100 bonds B (face value is 1000, maturity is 5 years, coupon rate is 5%, price is 97% of face value).

Task 3 - You consider investing in two stock funds. The first is a stock fund A with the expected return 15% and standard deviation 20%, the second is a stock fund B with the expected return 10% and standard deviation 8%. The correlation between the fund return is 0.50.

You require that your portfolio is the minimum-variance portfolio (MVP) of the two risky funds.

What is the investment proportion in the MVP of the two risky funds?

Reference no: EM132558763

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