Question

In: Finance

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 5.6%. The probability distribution of the risky funds is as follows:

  

Expected Return Standard Deviation
   Stock fund (S) 17%         46%         
   Bond fund (B) 8         40         

  

The correlation between the fund returns is 0.16.

  

Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places. Omit the "%" sign in your response.)

  

  Portfolio invested in the stock %
  Portfolio invested in the bond %
  Expected return %
  Standard deviation %

Solutions

Expert Solution

PORTFOLIO INVESTED IN STOCK : 91.06%

PORTFOLIO INVESTED IN BOND : 8.94%

EXPECTED RETURN : 16.20%

STANDARD DEVIATION : 42.60%


Related Solutions

A pension fund manager is considering three mutual funds. The first is a stock fund,...
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 stock fund has an expected return of 15% and a standard deviation of 23%. The bond fund has an expected return of 9% and a standard deviation of 23%. The correlation between the fund returns is.15. a) What...
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) 7% 39% The correlation between the fund returns is 0.0385. What is the expected return and standard deviation for...
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) 7% 39% The correlation between the fund returns is 0.0385. What is the expected return and standard deviation for...
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) 17% 37% Bond fund (B) 8% 31% The correlation between the fund returns is 0.1065. 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...
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. a-1. What are the investment proportions...
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...
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 ReturnStandard DeviationStock fund (S)15%32%Bond fund (B)9%23%The correlation between the fund returns is .15 What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not...
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 4.1%. The probability distributions of 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. Suppose now that your portfolio...
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 5.9%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 20% 49% Bond fund (B) 9% 43% The correlation between the fund returns is 0.0721. What is the expected return and standard deviation for...
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 5.0%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 11% 40% Bond fund (B) 6% 20% The correlation between the fund returns is 0.0500. What is the Sharpe ratio of the best feasible...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT