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 Stock fund (S) Bond fund (B) 15% 9% Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Standard Deviation 32% The correlation between the fund returns is 0.15. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky, or "tangency", portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) 23% % %
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 Stock fund (S) Bond fund (B) 15% 9% Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Standard Deviation 32% The correlation between the fund returns is 0.15. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky, or "tangency", portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) 23% % %
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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Transcribed Image Text: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.
Stock fund (S)
Bond fund (B)
15%
9%
Standard Deviation
Portfolio invested in the stock
Portfolio invested in the bond
Expected return
Standard deviation
32%
The correlation between the fund returns is 0.15.
Solve numerically for the proportions of each asset and for the expected return
and standard deviation of the optimal risky, or "tangency", portfolio. (Do not
round intermediate calculations and round your final answers to 2 decimal
places.)
4
23%
%
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