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 6%. The probability distribution of the risky funds is as follows:
| Expected Return | Standard Deviation | |
| Stock fund (S) | 15% | 32% |
| Bond fund (B) | 9 | 23 |
| The correlation between the fund returns is 0.15. |
1. What is the weight of the stock fund in the optimal risky portfolio?
2.What is the expected return of the optimal risky portfolio?
3. What is the standard Deviation of the optimal risky portfolio?
4. What is the reward to volatility ratio of the best feasible CAL?
Solutions
Expert Solution
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
jeff jeffy answered 1 year agoRelated Solutions
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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:
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first is a stock fund, the second is a long-term government and
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that yields a sure rate of 4.7%. The probability distributions of
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Expected Return
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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 8%. The probability distribution of the risky
funds is as follows:
Expected Return
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%
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%
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Standard Deviation
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20%
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