**Mutual Funds Analysis: A Study on Investment Strategies and Risk Assessment**---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)** | 16% | 35% || **Bond fund (B)** | 12% | 15% |The correlation between the fund returns is 0.13.**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 decimals rounded to 4 places.)*| | Rate of Return ||---------------|----------------|| Expected return | || Standard deviation | |In this assignment, we explore the optimum investment proportions between the stock and bond funds to minimize risk, as well as the expected returns and risk (as measured by standard deviation) of this diversified portfolio.**Diagrams and Tables Explanation:**1. **Table of Expected Return and Standard Deviation:** - This table provides the expected return and standard deviation for the stock fund (S) and the bond fund (B). - Expected Return represents the average return that an investor can expect. - Standard Deviation is a measure of the volatility or risk associated with the fund.2. **Investment Proportions Table:** - This table is meant for calculating and entering the proportions of the investment that should be allocated to the stock fund and the bond fund in the minimum-variance portfolio.3. **Rate of Return Table:** - This table is used for calculating and entering the expected return and standard deviation of the minimum-variance portfolio.By understanding and utilizing these calculations and concepts, pension fund managers can make informed decisions to optimize their investment strategies, balancing risk and return effectively.

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) Bond fund (B) 16% 35% 12 15 The correlation between the fund returns is 0.13. 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.)

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) Bond fund (B) 16% 35% 12 15 The correlation between the fund returns is 0.13. 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.)

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 5.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 16% Bond fund (B) 10% The correlation between the fund returns is 0.20. 36% 27% Problem 6-11 (Algo) Suppose now that your portfolio must yield an expected return of 13% and be efficient, that is, on the best feasible CAL. Required: a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Proportion invested in the T-bill fund % b-2. What is the proportion invested in each of the two risky funds? (Do not round intermediate…
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: Stock fund (S) Bond fund (B) Expected Return 24% 12 The correlation between the fund returns is 0.13. Standard Deviation You require that your portfolio yield an expected return of 12%, and that it be efficient, that is, on the steepest feasible CAL. Required A Required: a. What is the standard deviation of your portfolio? b. What is the proportion invested in the money market fund and each of the two risky funds? 30% 19 Complete this question by entering your answers in the tabs below. Required B Money market fund Stocks Bonds What is the proportion invested in the money market fund and each of the two risky funds? Note: Round your answers to 2 decimal places. Proportion Invested % % %
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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 5.8%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 19% 48% Bond fund (B) 9% 42% The correlation between the fund returns is 0.0762. What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 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 rate of 8%. The probability distribution of the risky funds is as follows: Expected return Standard Deviation Stock fund 19% 34% Bond Fund 10 18 The correlation between the fund returns is 0.11. 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.) a-2. What is the expected value and standard deviation of its rate of return? (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 government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 5.5%. The probability distribution of the risky funds is as follows: Expected return Standard Deviation Stock fund (S) 16% 32% Bond fund (B) 10 23 The correlation between the fund returns is 0.20. Suppose now that your portfolio must yield an expected return of 13% and be efficient, that is, on the best feasible CAL. Required:a. What is the standard deviation of your portfolio? What is the proportion invested in the T-bill fund? What is the proportion invested in each of the two risky funds? Proportion Invested Stocks % Bonds %
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 rate of 8%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (s) 20% 30% Bond fund (b) 12 15 The correlation between the fund returns is .10.Draw a tangent from the risk-free rate to the opportunity set. What does your graph show for the expected return and standard deviation of the optimal portfolio?
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 Bond fund Expected Return 17% 11 Standard Deviation 34% 25 The correlation between the fund returns is 0.15. Required: What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Sharpe ratio
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) The correlation between the fund returns is 0.25. Expected Return 17% 11% Required: 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.) X Answer is complete but not entirely correct. Expected return Standard deviation 14.67 X % 23.83 % Standard Deviation 38% 29%
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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 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 (D) Expected Return 20% 12 The correlation between the fund returns is 0.10. You require that your portfolio yield an expected return of 14%, 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.) T-bill fund Stocks Bonda Standard Deviation 30% 15 Standard deviation 13.92% 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.) Proportion Invested
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 Standard Deviation Stock fund (S) 15 % 32 % Bond fund (B) 9 % 23 % The correlation between the fund returns is 0.15. a. What would be the investment proportions of your portfolio if you were limited to only the stock and bond funds and the portfolio has to yield an expected return of 12%?

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