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 ylelds a sure rate of 5.5%. The probability distributions of the risky funds are: Standard Deviation Expected Return 178 Stock tund (S) Bond fund () 348 25% 11 The correlation between the fund returns is 0.15. Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfollo. (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 return Standard 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 ylelds a sure rate of 5.5%. The probability distributions of the risky funds are: Standard Deviation Expected Return 178 Stock tund (S) Bond fund () 348 25% 11 The correlation between the fund returns is 0.15. Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfollo. (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 return Standard 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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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 ylelds a sure rate of 5.5%. The probability
distributions of the risky funds are:
Stock fund (S)
Bond fund (B)
Expected Return
17
111
Standard Deviation
348
25%
The correlation between the fund returns is 0.15.
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 return
Standard deviation
%
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