pension fund manager cons ering tiree The first isa stock funa, long-terfm bond furnd, and the third sa 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) Bond fund (B) 20% 30% 12 15 The correlation between the fund returns is 0.10. You require that your portfolio yield an expected return of 14%, and that it be efficient, that is, on the steepest feasible CAL. a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.) Standard deviation :% o. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.) Proportion Invested Money market fund % Stocks Bonds %
pension fund manager cons ering tiree The first isa stock funa, long-terfm bond furnd, and the third sa 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) Bond fund (B) 20% 30% 12 15 The correlation between the fund returns is 0.10. You require that your portfolio yield an expected return of 14%, and that it be efficient, that is, on the steepest feasible CAL. a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.) Standard deviation :% o. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.) Proportion Invested Money market fund % Stocks Bonds %
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 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
208
Standard Deviation
Stock fund (S)
Bond fund (B)
30%
12
15
The correlation between the fund returns is 0.10.
You require that your portfolio yield an expected return of 14%, and that it be efficient, that is, on the steepest feasible CAL.
a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.)
Standard deviation
%
b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal
places.)
Proportion
Invested
Money market fund
%
Stocks
%
Bonds](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa4ee0a95-9e8a-489b-a934-180a0471bade%2F351a1246-452d-469a-987a-f8589b81f126%2Ft2i5sf9_processed.png&w=3840&q=75)
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
208
Standard Deviation
Stock fund (S)
Bond fund (B)
30%
12
15
The correlation between the fund returns is 0.10.
You require that your portfolio yield an expected return of 14%, and that it be efficient, that is, on the steepest feasible CAL.
a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.)
Standard deviation
%
b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal
places.)
Proportion
Invested
Money market fund
%
Stocks
%
Bonds
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