In: Finance
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 4.2%. The probability distributions of
the risky funds are:
Expected Return | Standard Deviation | |
Stock fund (S) | 12% | 33% |
Bond fund (B) | 5% | 26% |
The correlation between the fund returns is 0.0308.
What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.)