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 194 14 Stock fund (5) Bond fund (B) The correlation between the fund returns is 0.10. Standard Deviation 31% 23 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 Complete this question by entering your answers in the tabs below. Reg A2 What are the expected value and standard deviation of the minimum-variance portfolio rate of return? Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.

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 194 14 Stock fund (5) Bond fund (B) The correlation between the fund returns is 0.10. Standard Deviation 31% 23 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 Complete this question by entering your answers in the tabs below. Reg A2 What are the expected value and standard deviation of the minimum-variance portfolio rate of return? Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 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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2. Consider two assets, S and B. The expected return on S is 12.2% while the expected return on B is 5.8 % . The standard deviation of Asset S returns is 20 %, while the standard deviation of Asset B returns is 10%. The correlation between Asset S and Asset B returns is 0.05. (a) What is the expected return on a portfolio with 20% of invested funds in S and 80% of invested funds in B? (b) What is the standard deviation of returns for a portfolio with 20% of invested funds in S and 80% of invested funds in B? (c) Compare your answers obtained in part (b) to the expected return and standard deviation of a portfolio will all funds invested in B, and summarize the principle demonstrated by the comparison. (d) Assume that the correlation of 0.05 was based on
Suppose you are a fund manager, managing an active fund with an expected return of 14% and a standard deviation of 20%. The risk-free rate is 2%. You are advising a risk averse client who has mean-variance preferences and would like to invest in a combination of the risk-free asset and your active fund. They currently have a passive portfolio with an expected return of 8% and a standard deviation of 12%. The sharpe ratios for the active fund and passive portfolio are 0.6 and 0.5 respectively. Could you answer this question in excel and explain how you did it: Draw the capital allocation line (CAL) of your active fund on an expected return-standard deviation diagram. Clearly indicate the position of your active fund and your client’s current passive portfolio in the figure.
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: Stock fund (5) Bond fund (8) Expected Return 19% 12 Standard Deviation 32 15 The correlation between the fund returns is 0.11. a-1. What are the investment proportions in the minimum-variance portfolo of the two risky funds? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Portolo invested in the stock Portolo invested in the bond -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 decimals rounded to 4 places.) Rate of Retum wrw ped Standard deviation
Fund Beta Deviation (%) Return (%) Rf (%) XXX 1.07 5.13 19 6 YYY 1.02 4.28 17 6 ZZZ 0.86 3.52 12 6 Market 1 3.8 13 6 Compute the Sharpe Measure for the XXX fund. Compute the Treynor Ratio for the ZZZ fund. Compute the Jensen Measure for the YYY fund.
Use the following data to answer the question regarding the performance of Guardian Stock Fund and the market portfolio. The risk- free return during the sample period was 5%. Average return Standard deviation of returns Beta Residual standard deviation Guardian 14% 26% 1.2 0.60 X 4% Calculate the information ratio measure of performance for Guardian Stock Fund. (Round your answer to 2 decimal places. Do not round intermediate calculations.) Answer is complete but not entirely correct. Information ratio Market Portfolio 10% 21% 1 0%
blackrock fund has expected return of 10.5 standard deviation of 17.5%and beta of 0.8 nippon fund expected return of 12.5% , standard deviation of 21%and beta of 1.1. the two mutual fund have correlation coefficient of0.7.find the expected return and standard deviation of the market.what is the riskless rate of return
Use the following data to answer the question regarding the performance of Guardian Stock Fund and the market portfolio. The risk- free return during the sample period was 5%. Average return Standard deviation of returns Beta Residual standard deviation Guardian 14% 26% 1.2 (0.80) 4% X Answer is complete but not entirely correct. Information ratio Market Portfolio Calculate the information ratio measure of performance for Guardian Stock Fund. (Round your answer to 2 decimal places. Do not round intermediate calculations.) 10% 21% 1 0%
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 14.5% 24.6% 1.4 S&P 500 14.5% 21.3% 1 Risk-free 1% Calculate the Sharpe measure of performance for the S&P 500.
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 4%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation 234 14 294 17 Stock fund (5) Bond fund (8) The correlation between the fund returns is 0.12. You require that your portfolio yield an expected return of 12%, and that it be efficient, that is, on the steepest feasible CAL a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places) Standard deviation b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.) Money market fund Stocks Bonds Proportion Invested *** Check my work
The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 14% 24% 1.21 S&P 500 17.4% 19.4% 1 Risk-free 5.1% Calculate the Treynor measure of performance for the S&P 500. Convert percentages to decimal places before calculating your answer. ENTER your answer using FOUR DECIMAL places.Example: 1.2345
Question 1: Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. Stock A Stock B Stock C 1. Calculate the client expected return on the complete portfolio 2. Calculate the reward-to-variability ratio (Sharpe ratio): Part B A three-asset portfolio has the following characteristics: Expected Return Asset X Y Z 15% 10 6 Standard Deviation What is the expected return on this three-asset portfolio? 27% 33% 40% 22% 8 3 Weight 0.50 0.40 0.10

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