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 rate of 5.5%. The probability distribution of the
risky funds is as follows:
Expected Return | Standard Deviation | |
Stock fund (S) | 16% | 45% |
Bond fund (B) | 7 | 39 |
The correlation between the fund returns is 0.15.
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 (%) ________