Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 (B) Expected Return 22% 12 Standard Deviation 38% 16 The correlation between the fund returns is 0.10. a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Portfolio invested in the stock Portfolio invested in the bond a-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.)
image text in transcribed
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm 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: The correlation between the fund returns is 0.10 0-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Enter your onswers as decimals rounded to 4 ploces.) 0.2. What are the expected value and standard deviation of the minumum-variance portfolia rate of return? (Do not round intermediate colculations. Enter your onswers os decimals rounded to 4 places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes, Arshad Ahmad, Jordan Fortino

7th Canadian Edition

1259650650, 978-1259650659

More Books

Students also viewed these Finance questions

Question

Identify and control your anxieties

Answered: 1 week ago

Question

Understanding and Addressing Anxiety

Answered: 1 week ago