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 6%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (8) Bond fund (B) 21 36 13 22 The correlation between the fund returns is 0.13. You require that your portfollo yield an expected return of 11%, and that it be efficient, on the best feasible CAL. a. What is the standard deviation of your portfolo? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Standard 19.79 8 % deviation
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 6%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (8) Bond fund (B) 21 36 13 22 The correlation between the fund returns is 0.13. You require that your portfollo yield an expected return of 11%, and that it be efficient, on the best feasible CAL. a. What is the standard deviation of your portfolo? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Standard 19.79 8 % deviation
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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I use the correct fomular, but I don't know why the standard deviation is incorrect.
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 6%. The probability distribution of the risky funds
is as follows:
Expected
Return
Standard
Deviation
Stock fund
21
36
(S)
Bond fund (B)
13
22
The correlation between the fund returns is 0.13.
You require that your portfolio yield an expected return of 11%, and that it be efficient, on the best feasible CAL.
a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.)
Answer is complete but not entirely correct.
Standard
deviation
19.79
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