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 5.5%. The probability distributions of the risky funds are Expected Return 17% 11% Stock fund (5) Bond fund (0) The correlation between the fund returns is 0 25 Mandard deviation Standard Deviation 27% roblem 6-11 (Algo) uppose now that your portfolio must yield an expected return of 14% and be efficient, that is, on the best feasible CAL quired: What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal ieces)
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 5.5%. The probability distributions of the risky funds are Expected Return 17% 11% Stock fund (5) Bond fund (0) The correlation between the fund returns is 0 25 Mandard deviation Standard Deviation 27% roblem 6-11 (Algo) uppose now that your portfolio must yield an expected return of 14% and be efficient, that is, on the best feasible CAL quired: What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal ieces)
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 sure rate of 5.5% The probability
distributions of the risky funds are
Expected Return
17%
11%
Stock fund (5)
Bond fund (8)
The correlation between the fund returns is 0.25
Standard Deviation
36%
27%
Problem 6-11 (Algo)
Suppose now that your portfolio must yield an expected return of 14% and be efficient, that is, on the best feasible CAL
Required:
*. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal
places)
Standard deviation
Proportion invested in the T-bill und
b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal
places)
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