ECON: MACRO4
4th Edition
ISBN: 9781305436862
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 15, Problem 1.2PA
To determine
To explain:The way in which the
Concept Introduction:
The Federal Reserve manages the supply of the money and money aggregates in the economy. They increase money supply to stimulate output and employment in the economy. However, an increase in money supply also affects the price level in the economy. The Fed does this through open market purchase of U.S. government securities or by printing money. This increase in money supply results with a decrease in the interest rates. However, such money supply has major effect on the real
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1. A pension fund manager is considering three mutual funds. The first is a stock fund, the
second is a long-term government and corporate fund, and the third is a (riskless) T-bill
money market fund that yields a rate of 8%. The probability distributions of the risky
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Standard Deviation (%)
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Stock fund (Rs) 20
30
Bond fund (RB) 12
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The correlation between the fund returns is .10.
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