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: Stock fund (S) Bond fund (B) Expected Return 16% Standard Deviation 34% 10% 25% The correlation between the fund returns is 0.17. lem 6-9 (Algo) red: numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky lio. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
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: Stock fund (S) Bond fund (B) Expected Return 16% Standard Deviation 34% 10% 25% The correlation between the fund returns is 0.17. lem 6-9 (Algo) red: numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky lio. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
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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Question
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:
Stock fund (S)
Bond fund (B)
Expected Return
16%
Standard Deviation
34%
10%
25%
The correlation between the fund returns is 0.17.
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.)
× Answer is complete but not entirely correct.
Portfolio invested in the stock
Portfolio invested in the bond
Expected return
Standard deviation
76.00 ×%
24.00 ×%
14.84
%
21.39
%
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