[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) Expected Return 17% 11% Bond fund (B) The correlation between the fund returns is 0.25. Standard Deviation 36% 27% quired: Ive numerically for the proportions of each asset and for the expected return and standard deviation of the optimal tfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) tfolio invested in t
[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) Expected Return 17% 11% Bond fund (B) The correlation between the fund returns is 0.25. Standard Deviation 36% 27% quired: Ive numerically for the proportions of each asset and for the expected return and standard deviation of the optimal tfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) tfolio invested in t
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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![of 4
formation
[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)
Expected Return
17%
Bond fund (B)
11%
ed
The correlation between the fund returns is 0.25.
<
es
Standard Deviation
36%
27%
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.)
Portfolio invested in the stock
Portfolio invested in the bond
Expected return
Standard deviation
%
%
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F01db0fc3-9215-4ad8-8423-85c39cdddf36%2F18399e24-1d7b-437f-8dc1-9237e00ea6e8%2Fvb9jwip_processed.jpeg&w=3840&q=75)
Transcribed Image Text:of 4
formation
[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)
Expected Return
17%
Bond fund (B)
11%
ed
The correlation between the fund returns is 0.25.
<
es
Standard Deviation
36%
27%
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.)
Portfolio invested in the stock
Portfolio invested in the bond
Expected return
Standard deviation
%
%
%
%
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