Required: a. What would be the investment proportions of your portfolio if you were limited to only the stock and bond funds and the portfolio has to yield an expected return of 12%? Stocks Bonds Investment Proportions % % b. Calculate the standard deviation of the portfolio which yields an expected return of 12%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation

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Chapter13: Investing In Mutual Funds, Etfs, And Real Estate
Section: Chapter Questions
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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 government
and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability
distributions of the risky funds are:
Problem 6-12 (Static)
Stocks
Bonds
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is 0.15.
Required:
a. What would be the investment proportions of your portfolio if you were limited to only the stock and bond funds and the portfolio
has to yield an expected return of 12%?
Investment Proportions
%
%
Expected
Return
15%
9%
Standard deviation
Standard
Deviation
32%
238
b. Calculate the standard deviation of the portfolio which yields an expected return of 12%. (Do not round intermediate calculations.
Round your answer to 2 decimal places.)
%
Transcribed Image Text:A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Problem 6-12 (Static) Stocks Bonds Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.15. Required: a. What would be the investment proportions of your portfolio if you were limited to only the stock and bond funds and the portfolio has to yield an expected return of 12%? Investment Proportions % % Expected Return 15% 9% Standard deviation Standard Deviation 32% 238 b. Calculate the standard deviation of the portfolio which yields an expected return of 12%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) %
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