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 sure rate of 4.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation 156 91 Stock fund (8) Bond fund (B) The correlation between the fund returns is 0.15. Portfolio invested in the stock Portfolio invested in the bond Expected retur Standard deviation Problem 6-9 (Algo) Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) 40% 318 % % % %
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 sure rate of 4.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation 156 91 Stock fund (8) Bond fund (B) The correlation between the fund returns is 0.15. Portfolio invested in the stock Portfolio invested in the bond Expected retur Standard deviation Problem 6-9 (Algo) Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) 40% 318 % % % %
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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![Required information
Section Break (8-11)
[The following information applies to the questions displayed below.]
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 sure rate of 4.5%. The probability
distributions of the risky funds are:
Expected Return Standard Deviation
15%
400
98
318
Stock fund (8)
Bond fund (B)
The correlation between the fund returns is 0.15.
Problem 6-9 (Algo)
Required:
Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky
portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
Portfolio invested in the stock
Portfolio invested in the bond
Expected retur
Standard deviation
%
****
%
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fde9a2812-97d0-429c-937c-fad77270c336%2Fa97937b0-bf69-4ead-8d7c-edcec0cf435d%2Fziqvmo9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
Section Break (8-11)
[The following information applies to the questions displayed below.]
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 sure rate of 4.5%. The probability
distributions of the risky funds are:
Expected Return Standard Deviation
15%
400
98
318
Stock fund (8)
Bond fund (B)
The correlation between the fund returns is 0.15.
Problem 6-9 (Algo)
Required:
Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky
portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
Portfolio invested in the stock
Portfolio invested in the bond
Expected retur
Standard deviation
%
****
%
%
%
![Required information
Section Break (8-11)
[The following information applies to the questions displayed below.]
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-bili money market fund that yields a sure rate of 4.5%. The probability
distributions of the risky funds are:
Problem 6-8 (Algo)
Expected Return Standard Deviation
40%
319
Stock fund (8)
Bond fund (B)
The correlation between the fund returns is 0.15.
158
98
Required:
What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Answer is complete and correct.
11.12 %
26.20
%
Expected retum
Standard
deviation](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fde9a2812-97d0-429c-937c-fad77270c336%2Fa97937b0-bf69-4ead-8d7c-edcec0cf435d%2Fo85hnmc_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
Section Break (8-11)
[The following information applies to the questions displayed below.]
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-bili money market fund that yields a sure rate of 4.5%. The probability
distributions of the risky funds are:
Problem 6-8 (Algo)
Expected Return Standard Deviation
40%
319
Stock fund (8)
Bond fund (B)
The correlation between the fund returns is 0.15.
158
98
Required:
What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Answer is complete and correct.
11.12 %
26.20
%
Expected retum
Standard
deviation
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