Question
A pension fund manager is considering three mutual funds. The first is an equity fund with an expected return of 0.24 and a standard deviation
A pension fund manager is considering three mutual funds. The first is an equity fund with an expected return of 0.24 and a standard deviation of 0.32. The second is a long-term government and corporate bond fund with an expected return of 0.15 and a standard deviation of 0.15. The third is a T-bill money market fund that yields a rate of 0.09. The covariance between the stock and debt funds returns is 45.
What is the proportion of optimal risky portfolio invested in the equity 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 and unit for part 5
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