[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 16% 10% The correlation between the fund returns is 0.10. Standard Deviation 36% 27% Suppose now that your portfolio must yield an expected return of 13% 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 %
[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 16% 10% The correlation between the fund returns is 0.10. Standard Deviation 36% 27% Suppose now that your portfolio must yield an expected return of 13% 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 %
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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Vijay
![[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
16%
10%
The correlation between the fund returns is 0.10.
Standard Deviation
36%
27%
Suppose now that your portfolio must yield an expected return of 13% 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
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6b9dfba6-1660-4713-9b0b-65787c06b2ea%2Fe0a7d676-9101-4ea5-a393-56a55d055241%2F9wfh44h_processed.jpeg&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
16%
10%
The correlation between the fund returns is 0.10.
Standard Deviation
36%
27%
Suppose now that your portfolio must yield an expected return of 13% 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
%
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