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 238 Standard Deviation 298 Stock fund (S) Bond fund (B) 14 17 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: Expected Return 238 Standard Deviation 298 Stock fund (S) Bond fund (B) 14 17 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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Hugo has a concave ubility function of U(W)=√W. His only asset is shares in an Internet start-up company. Tomorrow he will learn the stock's value. He belleves that it is worth $225 with probability 80% and $256 with probability 20%. What is his expected utsty? What risk premium would he pay to avoid bearing this risk? The stock's expected utility (EU) is EU = (Enter a numeric response using a real number rounded to two decimal places.) han fro
An investor allocates $30,000 and $50,000 to two assets (A1 and A2). These assets generate 5% and -4.5% rate of returns, respectively. She allocates the remaining 50% of her portfolio to an asset (A3), which provides 4.5% rate of return. Calculate the portfolio's rate of return.
Discuss: i) diversifiable risk; ii) market risk; iii) systematic risk iv) unsystematic risk;
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 Standard Deviation Stock fund (S) 20% 30% Bond fund (B) 12 15 The correlation between the fund returns is 0.10. 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-2. What are the expected value and standard deviation of the minimum variance portfolio rate of return? (Do not round intermediate calculations. Enter your answers as percentage rounded to 2 decimals.) Expected return % Standard deviation %
Consider the following portfolio choice problem. The investor has initial wealth w andutility u(x) = (x^n) /n. There is a safe asset (such as a US government bond) that has netreal return of zero. There is also a risky asset with a random net return that has onlytwo possible returns, R1 with probability 1 − q and R0 with probability q. We assumeR1 < 0, R0 > 0. Let A be the amount invested in the risky asset, so that w − A isinvested in the safe asset.1) What are risk preferences of this investor, are they risk-averse, riskneutral or risk-loving?2) Find A as a function of w.
I need help with question d
None
(a) Calculate the risk-premium on this portfolio and provide a brief interpretation of it (b) Calculate the minimum sale price of the capital assets for the average investor.
advanced microeconomics, uncertainty