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: Expected Return 178 13 Stock fund (5) Bond fund (D) The correlation between the fund returns is 0.12. Required: a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? Reg A1 Standard Deviation 30% 18 Complete this question by entering your answers in the tabs below. Reg A2 What are the investment proportions in the minimum-variance portfolio of the two risky funds? Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places. Portfoto 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: Expected Return 178 13 Stock fund (5) Bond fund (D) The correlation between the fund returns is 0.12. Required: a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? Reg A1 Standard Deviation 30% 18 Complete this question by entering your answers in the tabs below. Reg A2 What are the investment proportions in the minimum-variance portfolio of the two risky funds? Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places. Portfoto 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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Nikul

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:
Expected
Return
178
13
Stock fund (5)
Bond fund (D)
The correlation between the fund returns is 0.12.
Required:
a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds?
a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return?
Reg A1
Standard
Deviation
38%
18
Complete this question by entering your answers in the tabs below.
Reg A2
What are the investment proportions in the minimum-variance portfolio of the two risky funds?
Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.
Portfolio invested in the stock
Portfolio invested in the bond
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