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 7%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation 35% 20 The correlation between the fund returns is 0.12. Stock fund (S) Bond fund (B) 18% 15 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. Answer is complete but not entirely correct. Sharpe ratio 0.4021
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 7%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation 35% 20 The correlation between the fund returns is 0.12. Stock fund (S) Bond fund (B) 18% 15 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. Answer is complete but not entirely correct. Sharpe ratio 0.4021
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 bond fund, and the third
is a money market fund that provides a safe return of 7%. The characteristics of the risky funds are as follows:
Expected
Return
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is 0.12.
18%
15
Standard
Deviation
35%
20
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.
0.4021 X
Answer is complete but not entirely correct.
Sharpe ratio](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbf5794f5-4ba0-4b05-8f49-4a9a49391c4d%2F900f5ac8-b7e0-4d03-a0c0-f18b7800323d%2Fe684nr6_processed.png&w=3840&q=75)
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 7%. The characteristics of the risky funds are as follows:
Expected
Return
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is 0.12.
18%
15
Standard
Deviation
35%
20
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.
0.4021 X
Answer is complete but not entirely correct.
Sharpe ratio
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