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A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long - term government and corporate
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a Tbill money market fund that yields a sure rate of The probability distributions of the risky funds are:
Expected Return Standard Deviation
Stock fund S
Bond fund B
The correlation between the fund returns is
Suppose now that your portfolio must yield an expected return of and be efficient, that is on the best feasible CAL ie the optimal risky portfolio
Instructor Tip: Calculate the Optimal Risky Portfolio weights and then create your complete portfolio use CH concepts based on the targeted return.
Required:
a What is the standard deviation of your portfolio? Do not round intermediate calculations. Round your answer to decimal places.
b What is the proportion invested in the Tbill fund? Do not round intermediate calculations. Round your answer to decimal places.
b What is the proportion invested in each of the two risky funds? Do not round intermediate calculations. Round your answers to decimal places.
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