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A recent advertisement promoted investing retirement savings using a "balanced" mutual fund. The
advertiser's balanced fund is 50 percent stocks and 50 percent investment grade corporate bonds. Stocks Bonds
Expected annual return 11% 6%
Standard deviation of Annual Return 20% 8% The Historic correlation between the returns of the well-diversified stock and investment grade
corporate bond portfolios of 0.15 is expected to continue. a. What is the expected return of the sponsor's balanced fund? b. What is the predicted standard deviation of the sponsor's balanced fund? c. If you put $3,000 per year into this portfolio for 30 years starting today, what is the expected
value of the portfolio at the end of the 30th year?

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