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: Stock fund (S) Bond fund (B) Expected Return Standard Deviation 16% 10% The correlation between the fund returns is 0.12. 40% 31% Required: What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your 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: Stock fund (S) Bond fund (B) Expected Return Standard Deviation 16% 10% The correlation between the fund returns is 0.12. 40% 31% Required: What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your 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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![48219
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
Stock fund (S)
Bond fund (B)
16%
10%
The correlation between the fund returns is 0.12.
40%
31%
Required:
What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Expected return
Standard deviation
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb2248294-420f-4c6d-aa55-1415a7aa2153%2Fda9ba832-36bc-40f7-a875-9c76e4a9e3ef%2F5gebyjs_processed.jpeg&w=3840&q=75)
Transcribed Image Text:48219
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
Stock fund (S)
Bond fund (B)
16%
10%
The correlation between the fund returns is 0.12.
40%
31%
Required:
What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Expected return
Standard deviation
%
%
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