Together with the deficit reduction i signed into law this past year, this budget will cut the deficit by $4 trillion over the next decade. this will put the country on a course to a level of deficits below 3 percent of gdp by the end of the decade, and will also allow us to stabilize the federal debt relative to the size of the economy. —president barack obama, 2012 budget message of the president what does it mean to measure a government's deficit "relative to the size of the economy"? a. to compare the size of the deficit to productivity b. to compare the size of the deficit to the unemployment rate c. to measure the deficit as a percentage of the economy or gdp d. to measure the deficit as a percentage of tax revenues

Monthly price data for mdltx and ekwax from yahoo finance is contained in the excel spreadsheet for this exercise. there are 37 months of price data for the period from september 2009 to september 2012. (note: these prices already incorporate dividend payments.) the 36 monthly returns for each fund are also provided. calculate average (arithmetic) monthly return and standard deviation for each fund. you can use the excel functions average, stdev to derive these stats. annualize these statistics. use the correl function in excel to derive the correlation coefficient between the two sets of returns. (annual correlation is the same as monthly correlation. hence, no need to annualize this stat.) using the annualized statistics derived in step 1, compute the expected return and standard deviation for portfolios containing from 0% to 100% mdltx (and 100% to 0% ekwax) by 10% increments. graph the resulting portfolios. based on your analysis, is there any potential benefit to diversification across these two funds? explain. of the 11 portfolios you graphed, which are efficient?