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: Stook fund (S) Bond fund (B) Expected Return Standard Deviation 16% 38% 12 21 The correlation between the fund returns is 0.12. 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 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: Stook fund (S) Bond fund (B) Expected Return Standard Deviation 16% 38% 12 21 The correlation between the fund returns is 0.12. 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

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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As an active fund manager, you have obtained information on three individual stocks, the market index, and T-bills as follows: Expected Return (%) Asset Stock 1 Stock 2 Stock 3 Market Index T-bills 20.0 16.0 6.0 10.0 4.0 Total Standard Deviation (%) 80.00 60.00 50.00 40.00 0.00 Beta 1.8 1.4 0.8 1.0 0.0 You decide to use the above information to form an optimal active portfolio, consisting of the three individual stocks. Determine the corresponding weights for the three stocks in the optimal active portfolio. Show your work.
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 0.60 X 4% Calculate the information ratio measure of performance for Guardian Stock Fund. (Round your answer to 2 decimal places. Do not round intermediate calculations.) Answer is complete but not entirely correct. Information ratio Market Portfolio 10% 21% 1 0%
blackrock fund has expected return of 10.5 standard deviation of 17.5%and beta of 0.8 nippon fund expected return of 12.5% , standard deviation of 21%and beta of 1.1. the two mutual fund have correlation coefficient of0.7.find the expected return and standard deviation of the market.what is the riskless rate of return
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%
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 14.5% 24.6% 1.4 S&P 500 14.5% 21.3% 1 Risk-free 1% Calculate the Sharpe measure of performance for the S&P 500.
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 4%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation 234 14 294 17 Stock fund (5) Bond fund (8) The correlation between the fund returns is 0.12. You require that your portfolio yield an expected return of 12%, and that it be efficient, that is, on the steepest feasible CAL a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places) Standard deviation b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.) Money market fund Stocks Bonds Proportion Invested *** Check my work
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 14% 24% 1.21 S&P 500 17.4% 19.4% 1 Risk-free 5.1% Calculate the Treynor measure of performance for the S&P 500. Convert percentages to decimal places before calculating your answer. ENTER your answer using FOUR DECIMAL places.Example: 1.2345
An insurance fund is analysing the performance of three different fund managers A, B and C. Each manager invests in one third of all asset classes to maintain a well diversified portfolio. The following information is available: A B C Market portfolio Average net return (%) 5 8 9 9 Volatility (%) 18 24 21 20 Beta 0.8 1.1 1.3 A risk free rate is established to be 2%. Calculate for each of the fund managers the expected return using CAPM, ex post Sharpe Ratio, Treynor Ratio, M2 alpha and Jensen’s alpha. Interpret your results.
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 25.7% 29% 1.3 S&P 500 17.9% 20% 1 Risk-free 3.8% Calculate the M2 measure of performance for Fund A. Use the correct sign if the answer is negative! Example: -1.23
In the following exercise, separate the investments according to the type of Keynesian demand they are: Transactions (0% to 5%), Precautionary (6% to 9%), and Speculative demand (greater than 10%). Investment in each category has the same risk. So you want to invest in the highest return for the same risk. Take each demand type and choose the highest return and put that amount into the investment. For example, if Bond fund A has a return of 4% and Fund B has a return of 5%, they have the same risk, so you would put $70 into bond fund B. You have the following investments Opportunities ad returns. Fidelity Bonds 11% Fidelity Magellan 9% Putman Bonds one 4% Putman bonds Two 12% Growth Stock One 15% Growth and Income 8% Income Fund 3% Putman Growth…
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.
An investor considers two mutual funds. Based on past experience, the first fund has an expected return of 0.08 and a standard deviation of 0.05. The second fund has an expected return of 0.07 and a standard deviation of 0.06. There is no reason to assume that future performance of these funds will differ from past performance. However, the second fund has a guarantee attached that the return in any year will not be negative.RequiredA. Which fund would a rational investor be likely to buy according to single-person decision theory?B. The investor buys the second fund. Use prospect theory to explain why.

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