A pension fund manager is considering three mutual funds. The first is a stock fund, the long-term government and corporate bond fund, and the third is a T-bill rate of 4.6%. The probability distribution of the two second is a money market fund that yields a risky funds is as follows: Expected Return Standard Deviation Stock fund (S Bond fund (B 36% 30% 16% 7% The correlation between the two fund returns is 0.16. Compute the proportions of stock fund and bond fund of the optimal risky portfolio, and calculate the expected return and standard deviation of the optimal risky portfolio. Assume that short sales of mutual funds are allowed. (Do not round intermediate calculations. Enter your answer as a percentage rounded to two decimal places.) Proportion invested in the stock fund % Proportion invested in the bond fund % Expected return Standard deviation
A pension fund manager is considering three mutual funds. The first is a stock fund, the long-term government and corporate bond fund, and the third is a T-bill rate of 4.6%. The probability distribution of the two second is a money market fund that yields a risky funds is as follows: Expected Return Standard Deviation Stock fund (S Bond fund (B 36% 30% 16% 7% The correlation between the two fund returns is 0.16. Compute the proportions of stock fund and bond fund of the optimal risky portfolio, and calculate the expected return and standard deviation of the optimal risky portfolio. Assume that short sales of mutual funds are allowed. (Do not round intermediate calculations. Enter your answer as a percentage rounded to two decimal places.) Proportion invested in the stock fund % Proportion invested in the bond fund % Expected return Standard deviation
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 5P
Related questions
Question
100%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning