Problem 7-4A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government andcorporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of the risky fundsis as follows:ExpectedStandardReturnDeviationStock fund (S)Bond fund (B)17%30%1122The 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 intermediatecalculations. Enter your answers as decimals rounded to 4 places.)Portfolio invested in the stock69.2241Portfolio invested in the bond0.7649

Given, Risk-free rate = 8% Stock expected return = 17% Stock standard deviation = 30% Bonds expected…

Answered: A pension fund manager is considering…

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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