Question
In: Finance
A pension fund manager is considering three mutual funds. The first is a stock fund, the...
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A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.3%. The probability distributions of the risky funds are: |
| Expected Return | Standard Deviation | |||
| Stock fund (S) | 13 | % | 34 | % |
| Bond fund (B) | 6 | % | 27 | % |
| The correlation between the fund returns is .0630. |
|
Suppose now that your portfolio must yield an expected return of 11% and be efficient, that is, on the best feasible CAL. |
| a. |
What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Standard deviation | % |
| b-1. |
What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Proportion invested in the T-bill fund | % |
| b-2. |
What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| Proportion Invested | |
| Stocks | % |
| Bonds | % |
Solutions
jeff jeffy answered 2 weeks agoRelated Solutions
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A pension fund manager is considering three mutual funds. The
first is a stock fund, the second is a long-term government and
corporate bond fund, and the third is a T-bill money market fund
that yields a sure rate of 5.5%. The probability distributions of
the risky funds are:
Expected Return
Standard Deviation
Stock fund (S)
16%
45%
Bond fund (B)
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39%
The correlation between the fund returns is 0.0385.
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A pension fund manager is considering three mutual funds. The first is a stock fund, the...
A pension fund manager is considering three mutual funds. The
first is a stock fund, the second is a long-term government and
corporate bond fund, and the third is a T-bill money market fund
that yields a sure rate of 5.5%. The probability distributions of
the risky funds are:
Expected Return
Standard Deviation
Stock fund (S)
16%
45%
Bond fund (B)
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The correlation between the fund returns is 0.0385.
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A pension fund manager is considering three mutual funds. The first is a stock fund, the...
A pension fund manager is considering three mutual funds. The
first is a stock fund, the second is a long-term government and
corporate bond fund, and the third is a T-bill money market fund
that yields a sure rate of 4.7%. The probability distributions of
the risky funds are:
Expected Return
Standard Deviation
Stock fund (S)
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37%
Bond fund (B)
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A pension fund manager is considering three mutual funds. The first is a stock fund, the...
A pension fund manager is considering three mutual funds. The
first is a stock fund, the second is a long-term government and
corporate bond fund, and the third is a T-bill money market fund
that yields a rate of 8%. The probability distribution of the risky
funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
17
%
30
%
Bond fund (B)
11
22
The correlation between the fund returns is 0.10.
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A pension fund manager is considering three mutual funds. The first is a stock fund, the...
A pension fund manager is considering three mutual funds. The
first is a stock fund, the second is a long-term government and
corporate bond fund, and the third is a T-bill money market fund
that yields a sure rate of 5.8%. The probability distributions of
the risky funds are:
Expected Return Standard Deviation
Stock fund (S) 19% 48%
Bond fund (B) 9% 42%
The correlation between the fund returns is 0.0762.
What is the Sharpe ratio of the best feasible...
A pension fund manager is considering three mutual funds. The first is a stock fund, the...
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A pension fund manager is considering three mutual funds. The first is a stock fund, the...
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the risky funds are:
Expected Return
Standard Deviation
Stock fund (S)
11
%
33
%
Bond fund (B)
8
%
25
%
The correlation between the fund returns is .1560.
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Expected Return
Standard Deviation
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Expected Return
Standard Deviation
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40%
Bond fund (B)
6%
20%
The correlation between the fund returns is 0.0500.
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