A mutual fund corporation offers a safe money market fund, Ask an Expert

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A mutual fund company offers a safe money market fund whose current rate is 4.50% (.045). The same company also offers an equity fund with an aggressive growth objective, which historically has exhibited an expected return of 20% (.20) and a standard deviation of .25.

a. Derive the equation for the risk-reward trade-off line.
b. How much extra expected return would be available to an investor for each unit of extra risk that she bears?
c. What allocation should be places in the money market fund if an investor desires an expected return of 15% (.15)?

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