A pension fund manager is considering three mutual funds. The first is a stock fund, the...
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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 bond fund, and the third is a T-bill money market fund that yields a rate of 3%. The probability distribution of the funds is as follows: < + Expected Return Standard Deviation Stock Fund 20% 40% Bond Fund 10% 15% Risk-free 3% Correlation 20% a) Find the investment proportions in the minimum variance portfolio (MVP) of the two risk asset (5 points) < b) Find the expected return and standard deviation for the minimum variance portfolio (5 points) < c) What portion of your wealth should go to S and B respectively to achieve the tangent portfolio (i.e., the portfolio with the highest Sharpe ratio) (5 points) < A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 3%. The probability distribution of the funds is as follows: < + Expected Return Standard Deviation Stock Fund 20% 40% Bond Fund 10% 15% Risk-free 3% Correlation 20% a) Find the investment proportions in the minimum variance portfolio (MVP) of the two risk asset (5 points) < b) Find the expected return and standard deviation for the minimum variance portfolio (5 points) < c) What portion of your wealth should go to S and B respectively to achieve the tangent portfolio (i.e., the portfolio with the highest Sharpe ratio) (5 points) <
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