Question
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 7%. The characteristics of the risky funds are as follows:
| Expected Return | Standard Deviation | ||||||
| Stock fund (S) | 19 | % | 31 | % | |||
| Bond fund (B) | 14 | 23 | |||||
The correlation between the fund returns is 0.10. What is the Sharpe ratio of the best feasible CAL?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
