What must corporate bonds of similar default risk

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1. Suppose you want to invest in one stock and one risk-free bond. The expected return and standard deviation of the stock 9% and 16%, respectively. The risk-free bond has an expected return of 2%. Suppose you want to invest 60 percent in the stock. What is the portfolio’s standard deviation?

2. An investor is in a 35% combined state and federal tax bracket. If municipal bonds offer a 3.75% p.a. yields what must corporate bonds of a similar default risk offer for the investor to prefer them to municipals?

Reference no: EM131954078

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