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) | 20 | % | 35 | % | |||
| Bond fund (B) | 11 | 15 | |||||
The correlation between the fund returns is 0.09. a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds?
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) | 20 | % | 35 | % | |||
| Bond fund (B) | 11 | 15 | |||||
The correlation between the fund returns is 0.09. 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
a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return?
|
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Contemporary Issues In Development Finance
Authors: Joshua Yindenaba Abor, Robert Lensink, Charles Komla Delali Adjasi
1st Edition
1138324329, 978-1138324329
