You manage an equity fund with an expected risk premium of 10% and an expected standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest Php60,000 of her portfolio in your equity fund and Php40,000 in a T-bill money market fund. What is the expected return and standard deviation of return on your client's portfolio?

You manage an equity fund with an expected risk premium of 10% and an expected standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest Php60,000 of her portfolio in your equity fund and Php40,000 in a T-bill money market fund. What is the expected return and standard deviation of return on your client's portfolio?

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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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 4%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation 234 14 294 17 Stock fund (5) Bond fund (8) The correlation between the fund returns is 0.12. You require that your portfolio yield an expected return of 12%, and that it be efficient, that is, on the steepest feasible CAL a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places) Standard deviation b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.) Money market fund Stocks Bonds Proportion Invested *** Check my work
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8. You manage an equity fund with an expected risk premium of 10% and an expected standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $40,000 in a T-bill money market fund. What are the expected return and standard deviation of return on your client's portfolio? 9. What is the reward-to-volatility (Sharpe) ratio for the equity fund in CFA Problem 8?

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