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 6%. The characteristics of the risky funds are as follows: Expected Return 24% 14 Sharpe ratio Standard Deviation 33% 22 Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.14. What is the Sharpe ratio of the best feasible CAL? Note: Do not round intermediate calculations. Enter your answer as a decimal 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 6%. The characteristics of the risky funds are as follows: Expected Return 24% 14 Sharpe ratio Standard Deviation 33% 22 Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.14. What is the Sharpe ratio of the best feasible CAL? Note: Do not round intermediate calculations. Enter your answer as a decimal 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
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Transcribed Image Text: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 6%. The characteristics of the risky funds are as follows:
Expected
Return
24%
14
Standard
Deviation
33%
22
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is 0.14.
Sharpe ratio
What is the Sharpe ratio of the best feasible CAL?
Note: Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.
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