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 17% 11% 38% 29% The correlation between the fund returns is 0.25. Suppose now that your portfolio must yield an expected return of 14% and be efficient, that is, on the best feasible CAL. Required: a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation % b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Proportion invested in the T-bill fund %
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 17% 11% 38% 29% The correlation between the fund returns is 0.25. Suppose now that your portfolio must yield an expected return of 14% and be efficient, that is, on the best feasible CAL. Required: a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation % b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Proportion invested in the T-bill fund %
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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son.4
![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
17%
38%
11%
29%
The correlation between the fund returns is 0.25.
Suppose now that your portfolio must yield an expected return of 14% and be efficient, that is, on the best feasible CAL.
Required:
a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal
places.)
Standard deviation
b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal
places.)
Proportion invested in the T-bill fund
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3a20ca76-394a-4538-a8c3-01a81dc79f4f%2Fe6eb05e7-8807-482f-8228-25a329107135%2F2nh6q28_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:
Stock fund (S)
Bond fund (B)
Expected Return Standard Deviation
17%
38%
11%
29%
The correlation between the fund returns is 0.25.
Suppose now that your portfolio must yield an expected return of 14% and be efficient, that is, on the best feasible CAL.
Required:
a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal
places.)
Standard deviation
b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal
places.)
Proportion invested in the T-bill fund
%
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