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 thirdis 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 (B)The correlation between the fund returns is 0.11.ExpectedReturn19%12Required:a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds?a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return?Req A1Complete this question by entering your answers in the tabs below.Reg A2What are the investment proportions in the minimum-variance portfolio of the two risky funds?Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.Portfolio invested in the stockPortfolio invested in the bondStandardDeviation32%15Req A1A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the thirdis a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows:ExpectedReturn19%12Expected returnStandard deviationStock fund (S)Bond fund (B)The correlation between the fund returns is 0.11.< Req A1StandardDeviation32%15Required:a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds?a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return?Req A2Complete this question by entering your answers in the tabs below.Req A2 >What are the expected value and standard deviation of the minimum-variance portfolio rate of return?Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.< Req A1Req A2 >

Standard deviation is a statistical tool used to quantify the degree of variability or dispersion…

Required: a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return?

Required: a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return?

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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