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 8%. The probability distribution of the risky funds is as follows:
| Expected Return | Standard Deviation | |||||
| Stock fund (S) | 22 | % | 37 | % | ||
| Bond fund (B) | 14 | 23 | ||||
The correlation between the fund returns is 0.10.
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. Enter your answers as decimals rounded to 4 places.)
Solutions
Expert Solution
The image shows answer in % form
The answers in decimal form are : we have to divide % answers by 100 to get in decimals
proportion of stock fund : 0.4954
proportion of bond fund : 0.5046
expected return :0.1796
standard deviation : 0.2265
jeff jeffy answered 3 months agoRelated Solutions
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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
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