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 8%. The characteristics of the risky funds are as follows:
| Expected Return | Standard Deviation | ||||||
| Stock fund (S) | 22 | % | 38 | % | |||
| Bond fund (B) | 12 | 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? Portfolio invested in the stock: Portfolio invested in the bond: What are the expected value and standard deviation of its rate of return? Expected return: Standard deviation: | |||||||
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Investments
Authors: Zvi Bodie, Alex Kane, Alan Marcus, Stylianos Perrakis, Peter
8th Canadian Edition
978-0071338875
