A pension fund manager is considering three mutual funds. The first is a stock fund with an expected return of 0.2 and a standard deviation of 0.32. The second is a long-term government and corporate bond fund with an expected return of 0.14 and a standard deviation of 0.15. The third is a T-bill money market fund that yields a rate of 0.08. The correlation between the stock and debts funds returns is 0.12.

What is the proportion of optimal risky portfolio invested in the stock fund?

Answer for part 1

What is the proportion of optimal risky portfolio invested in the debt fund ?

Answer for part 2

What is the expected return of the optimal risky portfolio?

Answer for part 3

What is the standard deviation of the optimal risky portfolio?

Answer for part 4

What is the reward-to-volatility ratio of the optimal CAL ?

Answer for part 5

How much will an investor with A=5 invest in the optimal risky portfolio?

Answer for part 6

How much will an investor with A=5 invest in the T-bill money market fund?

Answer for part 7

How much will an investor with A=5 invest in the stock fund?

Answer for part 8

How much will an investor with A=5 invest in the long-term government and corporate bond fund ?

Answer for part 9