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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?

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?

Essentials Of Investments
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: Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.11. Expected Return 19% 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? Req A1 Complete this question by entering your answers in the tabs below. Reg 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 places. Portfolio invested in the stock Portfolio invested in the bond Standard Deviation 32% 15 Req A1 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 19% 12 Expected return Standard deviation Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.11. < Req A1 Standard Deviation 32% 15 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? Req A2 Complete this question by entering your answers in the tabs below. Req A2 > What are the expected value and standard deviation of the minimum-variance portfolio rate of return? Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places. < Req A1 Req A2 >
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: Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.11. Expected Return 19% 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? Req A1 Complete this question by entering your answers in the tabs below. Reg 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 places. Portfolio invested in the stock Portfolio invested in the bond Standard Deviation 32% 15 Req A1 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 19% 12 Expected return Standard deviation Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.11. < Req A1 Standard Deviation 32% 15 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? Req A2 Complete this question by entering your answers in the tabs below. Req A2 > What are the expected value and standard deviation of the minimum-variance portfolio rate of return? Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places. < Req A1 Req A2 >
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