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: Stock fund (S) Bond fund (B) Expected Return 16% 10% The correlation between the fund returns is 0.20. Required: Standard Deviation 38% 29% What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? Expected return % = Standard deviation % =
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: Stock fund (S) Bond fund (B) Expected Return 16% 10% The correlation between the fund returns is 0.20. Required: Standard Deviation 38% 29% What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? Expected return % = Standard deviation % =
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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Transcribed Image Text: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:
Stock fund (S)
Bond fund (B)
Expected Return
16%
10%
The correlation between the fund returns is 0.20.
Required:
Standard Deviation
38%
29%
What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds?
Expected return %
=
Standard deviation % =
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