Answered step by step
Verified Expert Solution
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 government and corporate bond fund,
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 rate of 4.5%. The probability distribution of the risky funds is as follows: Expected Return 15% Stock fund (5) Bond fund (8) Standard Deviation 35% 29 6 The correlation between the fund returns is 0.15. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places. Omit the "%" sign in your response.) % % Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation % % 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 4.6%. The probability distributions of the risky funds are: Expected Return 16% stock fund (S) Bond fund (8) Standard deviation 36% zel The correlation between the fund returns is .0800. Suppose now that your portfolio must yield an expected return of 14% and be efficient, that is, on the best feasible CAL. a. What is the standard deviation of your portfolio? (Do not round Intermediate cakulations. Round your answer to 2 decimal places. Standard deviation 29.25 % b-1. What is the proportion invested in the T-bill fund? (Do not round Intermedlate cakulation. Round your answer to 2 decimal places. Proportion invested in the T-bill tund b-2 What is the proportion invested in each of the two risky funds? IDo not round Intermediate cakulations. Round your answer to 2 ctecimal places. Proportion Invested % Stocks Bonds Drow 11 of 14 Nord
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started