What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (

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
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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 government and
corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.8%. The probability distributions of
the risky funds are:
Stock fund (S)
Bond fund (8)
Expected Return
19%
9%
Expected return
Standard deviation
The correlation between the fund returns is 0.0762.
What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Standard Deviation
48%
42%
%
Transcribed Image Text: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 5.8%. The probability distributions of the risky funds are: Stock fund (S) Bond fund (8) Expected Return 19% 9% Expected return Standard deviation The correlation between the fund returns is 0.0762. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Standard Deviation 48% 42% %
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