[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 15% 9% 38% 29% The correlation between the fund returns is 0.15. Suppose now that your portfolio must yield an expected return of 12% 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 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 % b-2. What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Proportion Invested Stocks Bonds % %
[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 15% 9% 38% 29% The correlation between the fund returns is 0.15. Suppose now that your portfolio must yield an expected return of 12% 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 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 % b-2. What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Proportion Invested Stocks Bonds % %
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter13: Investing In Mutual Funds, Etfs, And Real Estate
Section: Chapter Questions
Problem 2FPE
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![[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
15%
9%
38%
29%
The correlation between the fund returns is 0.15.
Suppose now that your portfolio must yield an expected return of 12% 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%2Fc9737efd-391f-457a-98f6-aa044a0527f1%2Facae5457-d46d-490a-8d9b-2744072517c4%2Fnm9qtb_processed.png&w=3840&q=75)
Transcribed Image Text:[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
15%
9%
38%
29%
The correlation between the fund returns is 0.15.
Suppose now that your portfolio must yield an expected return of 12% 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
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
%
b-2. What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to
2 decimal places.)
Proportion Invested
Stocks
Bonds
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc9737efd-391f-457a-98f6-aa044a0527f1%2Facae5457-d46d-490a-8d9b-2744072517c4%2F12wswyg_processed.png&w=3840&q=75)
Transcribed Image Text:!
Required information
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
%
b-2. What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to
2 decimal places.)
Proportion Invested
Stocks
Bonds
%
%
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