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 5.6%. The probability distributions of the risky funds are: Expected Return 17% 8% Expected return Standard deviation Standard Deviation 46% 40% Stock Fund (S) Bond fund (6) The correlation between the fund returns is 0.0600. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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 5.6%. The probability distributions of the risky funds are: Expected Return 17% 8% Expected return Standard deviation Standard Deviation 46% 40% Stock Fund (S) Bond fund (6) The correlation between the fund returns is 0.0600. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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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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 5.6%. The
probability distributions of the risky funds are:
Stock Fund (5)
Bond fund (6)
Expected Return
17%
8%
Expected return
Standard deviation
The correlation between the fund returns is 0.0600.
What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not
round intermediate calculations. Round your answers to 2 decimal places.)
Standard Deviation
46%
40%
%
%
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