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A pension fund manager is considering three assets. The first is a stock fund, the second...

A pension fund manager is considering three assets. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill yielding 8%. The probability distribution of the risky funds is as follows:

E[r] std. dev.
Stock fund 20% 30%
Bond fund 12% 15%

The correlation between the fund returns is 0.10.

A) What is the investment proportion in the minimum variance portfolio of stock fund?

B) Solve numerically for the proportions of stock fund in the optimal risky portfolio.

Round your answers to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
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