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A portfolio of risky bonds has an expected return of 4% and a standard deviation of 4%. A portfolio of

A portfolio of risky bonds has an expected return of 4% and a standard deviation of 4%. A portfolio of stocks has an expected return of 8% and a standard deviation of 20%. The correlation between the stock and bond funds is 0.8 The risk-free rate is 3.2% In this case, the optimal risky portfolio is the portfolio that is composed of 33% of the bond fund and 67% of the risky equity. Your utility function is described as U = E(r) – 1****************/

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