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 0.10. Standard Deviation 38% 29% uired: e numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky folio. (Do not round intermediate calculations and round your final answers to 2 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 16% 10% Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.10. Standard Deviation 38% 29% uired: e numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky folio. (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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![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 0.10.
Portfolio invested in the stock
Portfolio invested in the bond
Expected return
Standard deviation
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.)
Standard Deviation
38%
29%
%
%
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F64349577-16bc-4178-bfd2-df11f961b456%2F97294d08-60e2-4d4a-bb64-ae91b458a6c0%2Fi1am9x_processed.jpeg&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 0.10.
Portfolio invested in the stock
Portfolio invested in the bond
Expected return
Standard deviation
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.)
Standard Deviation
38%
29%
%
%
%
%
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