A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation Stock fund (S) 16% 38% Bond fund (B) 12 21 The correlation between the fund returns is 0.12. Required: a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? Complete this question by entering your answers in the tabs below. Req A1 Req A2 What are the investment proportions in the minimum-variance portfolio of the two risky funds Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 pl Portfolio invested in the stock Portfolio invested in the bond
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation Stock fund (S) 16% 38% Bond fund (B) 12 21 The correlation between the fund returns is 0.12. Required: a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? Complete this question by entering your answers in the tabs below. Req A1 Req A2 What are the investment proportions in the minimum-variance portfolio of the two risky funds Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 pl Portfolio invested in the stock Portfolio invested in the bond
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 bond fund, and the third is a money market fund that provides a
safe return of 8%. The characteristics of the risky funds are as follows:
Expected
Return
Standard
Deviation
Stock fund (S)
16%
38%
Bond fund (B)
12
21
The correlation between the fund returns is 0.12.
Required:
a-1. What are the investment proportions in the minimum-variance portfolio of the two
risky funds?
a-2. What are the expected value and standard deviation of the minimum-variance
portfolio rate of return?
Complete this question by entering your answers in the tabs below.
Req A1
Req A2
What are the investment proportions in the minimum-variance portfolio of the two risky funds
Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 pl
Portfolio invested in the stock
Portfolio invested in the bond
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