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 9%. The probability distribution of the risky funds is as follows:
| Expected Return | Standard Deviation | |||||
| Stock fund (S) | 22 | % | 38 | % | ||
| Bond fund (B) | 12 | 16 | ||||
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
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
All answers are in % in image
To convert answers in decimals, we have to divide answers by 100
proportion of stock fund : 0.4704
proportion of bond fund : 0.5296
expected return : 0.1670
standard deviation : 0.2053
jeff jeffy answered 4 weeks 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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