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: Expected Return Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.15. 158 98 Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Answer is complete but not entirely correct. 15.55 X % 84.45 X % 9.93 % 25.52 % Standard Deviation 32% 23%

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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[The following information applies to the questions displayed below.]
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 (5)
Bond fund (B)
The correlation between the fund returns is 0.15.
Expected
Return
158
98
Required:
Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky
portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
Answer is complete but not entirely correct.
15.55%
84.45 X %
9.93 X %
25.52 %
Portfolio invested in the stock
Portfolio invested in the bond
Expected return
Standard deviation
Standard
Deviation
32%
23%
4
Transcribed Image Text:Required information [The following information applies to the questions displayed below.] 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 (5) Bond fund (B) The correlation between the fund returns is 0.15. Expected Return 158 98 Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Answer is complete but not entirely correct. 15.55% 84.45 X % 9.93 X % 25.52 % Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Standard Deviation 32% 23% 4
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