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: Standard Deviation Stock fund (S) Bond fund (B) Expected Return 15% 9% 38% 29% The correlation between the fund returns is 0.15.
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: Standard Deviation Stock fund (S) Bond fund (B) Expected Return 15% 9% 38% 29% The correlation between the fund returns is 0.15.
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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[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:
Expected Return
Standard Deviation
Stock fund (S)
Bond fund (B)
15%
38%
9%
29%
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.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F86969b98-9ea7-45ea-a31a-789a1f50252c%2F712c0386-6af7-440a-b8b7-39c50f2b51be%2Fv2nm27p.bmp&w=3840&q=75)
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:
Expected Return
Standard Deviation
Stock fund (S)
Bond fund (B)
15%
38%
9%
29%
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.)
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