Question
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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 | Standard Deviation | |||||
| Stock fund (S) | 19 | % | 34 | % | ||
| Bond fund (B) | 10 | 18 | ||||
The correlation between the fund returns is 0.11.
Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)
Portfolio invested in stock
Portfolio invested in bond
expected return
standard deviation
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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corporate bond fund, and the third is a T-bill money market fund
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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 sure rate of 5.5%. The probability distributions of
the risky funds are:
Expected Return
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Stock fund (S)
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Bond fund (B)
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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 sure rate of 4.7%. The probability distributions of
the risky funds are:
Expected Return
Standard Deviation
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Bond fund (B)
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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
Standard Deviation
Stock fund (S)
17
%
30
%
Bond fund (B)
11
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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
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Bond fund (B) 9% 42%
The correlation between the fund returns is 0.0762.
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A pension fund manager is considering three mutual funds. The first is a stock fund, the...
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A pension fund manager is considering three mutual funds. The first is a stock fund, the...
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that yields a sure rate of 4.1%. The probability distributions of
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Expected Return
Standard Deviation
Stock fund (S)
11
%
33
%
Bond fund (B)
8
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%
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Expected Return
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Expected Return
Standard Deviation
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40%
Bond fund (B)
6%
20%
The correlation between the fund returns is 0.0500.
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