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 8%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund () Expected Return 19 12 Standard Deviation 32% 15 The corelation between the fund returns is 0.1. 1. What are the investment proportions in the minimum-variance portfolo of the two risky funds? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Portolo invested in the stock Portolo invested in the bond 2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? (Do not round Intermediate calculations. Enter your answers as decimals rounded to 4 places)

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 8%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund () Expected Return 19 12 Standard Deviation 32% 15 The corelation between the fund returns is 0.1. 1. What are the investment proportions in the minimum-variance portfolo of the two risky funds? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Portolo invested in the stock Portolo invested in the bond 2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? (Do not round Intermediate calculations. Enter your answers as decimals rounded to 4 places)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 5P

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