esA pension fund manager is considering three mutual funds for investment. The first one is a stock fund, the second is a bond fund andthe third is a money market fund. The money market fund yields a risk-free return of 6%. The inputs for the risky funds are given in thefollowing table.Expected Return Standard Deviation12%9%30%22%The correlation coefficient between the stock and the bond funds is 0.29.a. What is the expected return and the variance for a portfolio that invests 57% in the stock fund and 43% in the bond fund? (Roundintermediate calculations to at least 4 decimal places and final answers to 2 decimal places.)FundStock fundBond fundExpected returnVariance%%2b. What is the expected return and the variance for a portfolio that invests 57% in the stock fund and 43% in the money market fund?[Hint: Note that the correlation coefficient between the portfolio and the money market fund is zero.] (Round intermediate calculationsto at least 4 decimal places and final answers to 2 decimal places.)Expected returnVariance%%2

Expected return refers to the rate of return that is being earned over the amount of investment by…

A pension fund manager is considering three mutual funds for investment. The first one is a stock fund, the secon the third is a money market fund. The money market fund yields a risk-free return of 6%. The inputs for the risky fe following table. Fund Stock fund Bond fund Expected Return Standard Deviation 12% 9% Expected return Variance The correlation coefficient between the stock and the bond funds is 0.29. a. What is the expected return and the variance for a portfolio that invests 57% in the stock fund and 43% in the bo intermediate calculations to at least 4 decimal places and final answers to 2 decimal places.) 30% 22% % %2

A pension fund manager is considering three mutual funds for investment. The first one is a stock fund, the secon the third is a money market fund. The money market fund yields a risk-free return of 6%. The inputs for the risky fe following table. Fund Stock fund Bond fund Expected Return Standard Deviation 12% 9% Expected return Variance The correlation coefficient between the stock and the bond funds is 0.29. a. What is the expected return and the variance for a portfolio that invests 57% in the stock fund and 43% in the bo intermediate calculations to at least 4 decimal places and final answers to 2 decimal places.) 30% 22% % %2

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Use the following data to answer the question regarding the performance of Guardian Stock Fund and the market portfolio. The risk- free return during the sample period was 5%. Average return Standard deviation of returns Beta Residual standard deviation Guardian 14% 26% 1.2 (0.80) 4% X Answer is complete but not entirely correct. Information ratio Market Portfolio Calculate the information ratio measure of performance for Guardian Stock Fund. (Round your answer to 2 decimal places. Do not round intermediate calculations.) 10% 21% 1 0%
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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 6%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 24% 14 Standard Deviation 33% 22 The correlation between the fund returns is 0.14. You require that your portfolio yield an expected return of 16%, and that it be efficient, that is, on the steepest feasible CAL. Required: a. What is the standard deviation of your portfolio? b. What is the proportion invested in the money market fund and each of the two risky funds? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below.
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Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A B с 9.30% 10.35 12.10 14% 14 14 0.8 1.1 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 6.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) a. What is the market risk premium (гM-TRF)? Round your answer to one decimal place. % b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. % d. What would you expect the standard deviation of Fund P to be? I. Less than 14% II. Greater than 14% III. Equal to 14% -Select-

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