a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follo Expected Return Standard Deviation 21% 13 Stock fund (S) Bond fund (B) he correlation between the fund returns is 0.13. 1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? (Do not alculations. Enter your answers as decimals rounded to 4 places.) Portfolio invested in the stock Portfolio invested in the bond 36% 22 2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? alculations. Enter your answers as decimals rounded to 4 places.) Expected return Rate of Return
a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follo Expected Return Standard Deviation 21% 13 Stock fund (S) Bond fund (B) he correlation between the fund returns is 0.13. 1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? (Do not alculations. Enter your answers as decimals rounded to 4 places.) Portfolio invested in the stock Portfolio invested in the bond 36% 22 2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? alculations. Enter your answers as decimals rounded to 4 places.) Expected return Rate of Return
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter13: Investing In Mutual Funds, Etfs, And Real Estate
Section: Chapter Questions
Problem 2FPE
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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 bond fund, and the third
is a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows:
Stock fund (S)
Bond fund (B)
Expected Return Standard Deviation
21%
13
36%
22
The correlation between the fund returns is 0.13.
a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? (Do not round intermediate
calculations. Enter your answers as decimals rounded to 4 places.)
Portfolio invested in the stock
Portfolio invested in the bond
a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? (Do not round intermediate
calculations. Enter your answers as decimals rounded to 4 places.)
Expected return
Standard deviation
Rate of Return](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0bc58846-50f0-4e5d-a312-f249853bfd80%2F76de511b-c494-4605-bf82-f961aae7ed2a%2Fjhrqjb7d_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third
is a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows:
Stock fund (S)
Bond fund (B)
Expected Return Standard Deviation
21%
13
36%
22
The correlation between the fund returns is 0.13.
a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? (Do not round intermediate
calculations. Enter your answers as decimals rounded to 4 places.)
Portfolio invested in the stock
Portfolio invested in the bond
a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? (Do not round intermediate
calculations. Enter your answers as decimals rounded to 4 places.)
Expected return
Standard deviation
Rate of Return
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