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What would be the expected return and standard deviation

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Reference no: EM133522266

There are a Morgan fund and a HSBC fund in a market. The Morgan fund expect return is estimated at 7% per year, with a standard deviation of 20%. The HSBC fund expected return is estimated at 12% per year with a standard deviation of 35%. The risk-free rate is 2%. Assuming the correlation between the annual returns of the two funds is zero.

Question a. If the correlation coefficient of the two fund returns is zero, what would be the expected return and standard deviation of the global minimum variance portfolio with the investment in the two funds?

Question b. If the correlation coefficient of the two fund returns is -1, can you recommend a risk-free rate to the government to issue Treasury Bond? What is the rate of the Treasury Bond you recommend and the risk of to invest in this treasury bond?

 

Reference no: EM133522266

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