Required information [The following information applies to the questions displayed below.] 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: Expected Return Standard Deviation 16% 10% Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.11. Sharpe ratio 40% 31% Required: What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer 4 decimal places.)
Required information [The following information applies to the questions displayed below.] 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: Expected Return Standard Deviation 16% 10% Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.11. Sharpe ratio 40% 31% Required: What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer 4 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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Required information
[The following information applies to the questions displayed below.]
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:
Expected Return
16%
10%
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is 0.11.
Sharpe ratio
Standard Deviation
40%
31%
Required:
What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to
4 decimal places.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcbfc985c-c9e2-483b-bebb-4c72a4a83b83%2F7a60da24-7adf-42f3-8e25-31b15efb8025%2Fohpprqb_processed.png&w=3840&q=75)
Transcribed Image Text:!
Required information
[The following information applies to the questions displayed below.]
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:
Expected Return
16%
10%
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is 0.11.
Sharpe ratio
Standard Deviation
40%
31%
Required:
What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to
4 decimal places.)
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