Question
In: Finance
An insurance fund manager is considering three mutual funds.
An insurance 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 one is a risk-free asset that yields a certain rate of 8%. The probability distributions of the risky funds are: Stock fund: E(R) = 20% and variance = 30%. Bond fund: E(R) = 12% and variance= 15%. The correlation coefficient between the fund returns is p= 0.1.
(a) What are the weights of the minimum-variance portfolio proportions? Calculate the expected return and standard deviation of this portfolio.
(b) Derive the tangency portfolio. What is the corresponding reward-to-variability (Sharpe) ratio?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
A pension fund manager is considering three mutual funds.
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%36%Bond fund (B)9%27%What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2...
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...
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