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) 19 % 34 %
Bond fund (B) 10 18

The correlation between the fund returns is 0.11.

a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

Portfolio invested in the stock:

Portfolio invested in the bond:

a-2. What is the expected value and standard deviation of its rate of return? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

Expected return:

Standard deviation:

Solutions

Expert Solution

Part A

Part B


Related Solutions

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...
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 5.0%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 11% 40% Bond fund (B) 6% 20% The correlation between the fund returns is 0.0500. What is the Sharpe ratio of the best feasible...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT