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 Stock fund (S) 15% Bond fund (B) 9% The correlation between the fund returns is 0.15. 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.) 40% 31%
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 Stock fund (S) 15% Bond fund (B) 9% The correlation between the fund returns is 0.15. 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.) 40% 31%
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
4.5%. The probability distributions of the risky
funds are:
Expected Return
Stock fund (S)
15%
Bond fund (B) 9%
The correlation between the fund returns is
0.15.
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.)
S
40%
31%
Transcribed Image Text:Stock fund (S)
Bond fund (B)
Expected Return
15%
9%
Standard Deviation
40%
31%
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