A pension fund manager is considering three mutual funds. The first is astock 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 rate of 8%. Theprobability distribution of the risky funds is as follows:Stock fund (S)Bond fund (B)Proportionin Stock FundThe correlation between the fund returns is 0.10.Tabulate the investment opportunity set of the two risky funds. (Round youranswers to 2 decimal places.)0.00 %ExpectedReturn20%1220.0040.0060.0080.00100.00Proportionin Bond FundStandardDeviation30%15100.00 %80.0060.0040.0020.000.00ExpectedReturn%StandardDeviation%

The expected return is the amount of profit or loss an investor can anticipate receiving on an…

Tabulate the investment opportunity set of the two risky funds. (Round y answers to 2 decimal places.) Proportion in Stock Fund 0.00 % 20.00 40.00 60.00 80.00 100.00 Proportion in Bond Fund 100.00 % 80.00 60.00 40.00 20.00 0.00 Expected Return % Standard Deviation %

Tabulate the investment opportunity set of the two risky funds. (Round y answers to 2 decimal places.) Proportion in Stock Fund 0.00 % 20.00 40.00 60.00 80.00 100.00 Proportion in Bond Fund 100.00 % 80.00 60.00 40.00 20.00 0.00 Expected Return % Standard Deviation %

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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: Expected Return Standard Deviation Stock fund (S) 20% 30% Bond fund (B) 12 15 The correlation between the fund returns is 0.10. a-1. What are the investment proportions in the minimum - variance portfolio of the two risky funds. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Portfolio invested in the stock Portfolio invested in the bond a-2. What are the expected value and standard deviation of the minimum variance portfolio rate of return? (Do not round intermediate calculations. Enter your answers as percentage rounded to 2 decimals.) Expected return % Standard deviation %
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