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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 7%. The probability distribution of the risky funds is as follows:
| Expected Return | Standard Deviation | |||||
| Stock fund (S) | 23 | % | 28 | % | ||
| Bond fund (B) | 15 | 17 | ||||
The correlation between the fund returns is 0.12.
You require that your portfolio yield an expected return of 13%, and that it be efficient, on the best feasible CAL.
a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.)
b. What is the proportion invested in the T-bill fund and each of the two risky funds? (Round your answers to 2 decimal places.)
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 7%. The probability distribution of the risky funds is as follows:
| Expected Return | Standard Deviation | |||||
| Stock fund (S) | 23 | % | 28 | % | ||
| Bond fund (B) | 15 | 17 | ||||
The correlation between the fund returns is 0.12.
You require that your portfolio yield an expected return of 13%, and that it be efficient, on the best feasible CAL.
a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.)
b. What is the proportion invested in the T-bill fund and each of the two risky funds? (Round your answers to 2 decimal places.)
T bill fund =
stocks =
bonds =
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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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
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%
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