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Consider historical data showing that the average annual rate of return on the S&P 500 portfolio...

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 27% 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 shown below

WBills WIndex Expected Return Variance
0.0 1.0 0.1400 0.0729 Example
0.2 0.8
0.4 0.6
0.6 0.4
0.8 0.2
1.0 0.0
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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

| 0 = a = 3 3 4 5 ? v L 1 ENG 02:31 13-02-2020 23 17479 x JS fe JT JR JU JV RETURN ON T BILL EXPECTED RETURN ON PORTFOLIO WBI

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