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 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 the
minimum-variance portfolio of the two risky funds? (Do not
round intermediate calculations. Round your answers to 2 decimal
places.)
Expected return%
Standard deviation%
Solutions
Expert Solution
hence standard deviation of
minimum variation portfolio = 30.03%
Expected return = 10.83%
jeff jeffy answered 2 years agoRelated Solutions
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Bond fund (B)
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Expected Return
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Expected Return
Standard Deviation
Stock fund (S)
11
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33
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Bond fund (B)
8
%
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Expected Return
Standard Deviation
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Expected Return
Standard Deviation
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%
44
%
Bond fund (B)
8
%
38
%
The correlation between the fund returns is .0684.
Suppose now that your portfolio...
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