Part TWO Portfolio Theory fund, and the third is a T-bill The following data apply to Problems 8-12. A pension fund manager is considering three mutual funds. The first is a stock the second is a long-term government and corporate bond fund, and the third is. money market fund that yields a sure rate of 5.5%. The probability distributions of risky funds are: Standard Deviation Expected Return 15% 32% Stock fund (5) Bond fund (B) The correlation between the fund returns is 0.15. 8. Tabulate and draw the investment opportunity set of the two risky funds. Use invest- ment proportions for the stock fund of 0% to 100% in increments of 20%. What expected return and standard deviation does your graph show for the minimum-variance portfolio? (LO 6-2) the possible which the The more TRUE the rear the al return from an investment is less than the s h and deviation hoc mum values whereas the values, whereas the standard deviation uses all a There are m cum es the main haben offering love ted rates or return tend to be D of return while the arithmetic the arithmetic and geometric te the typical return for a Which of the following statements is TRUE" A Theometriemen mesures the average annual rates of retum while multiple time periods men mesures the compound growth rate The more the returns vary. the bigger the difference between the arithmeti mansill be The difference is dependent on the relevant investment horizon The seometric mean is appropriate when we are trying to estimate the typical when period D. The arithmetic mean is a better avere return estimate when we are interested of return performance of an investment over time. n we are interested in the rate Alub ht aware of Carine three yeste for $45.00. Ile was paid two annual dende of 4.5 in the years in the stock price today is $ od e r the stock 8.50. What is the that she the efficient inter and has the le sobito of the e e dominate portfolios that Wher el M The mette istuted by e d relation wide on Minnie and holding posted porttirerum constant ther Na thahere will not an efficient frontier Standard deviati have the following for Smoked Meat Corporation Chasing Price (May 4, 2007 May 2007 5.6,37 May 2007 $26.95 Fone June une 1200 52745 weekly returns over the 6-week period? mate and seometrie average weekly returns over the What are the D ream inicio owner Which of the ccand only 0-day T-bill and Stock The expected return pected retum on Stock Ais 12 percent with a is the portfolio standard deviation if the expected 10A portt i tornwecurities: 90-da T-bill and Stock the day 5 percent The expected return on Stock andard deviation of 20 percent. What is the porttito standard de for this parfois 15 percent? A 1396 12.00 16.09 D. 38.00 l compensated for unique risk. e the following two statements to answer this question: The CAPM points out that rational investors should be compensated for IT. The CAPM implies thustusteater is the appropriate measure of determine the risk premium required by investors for holding a risky security and IT are correct. and I are incorrect is correct, it is incorrect incorrect is correct A R D Which of the followinis NOT a correct statement of beta kati the individuals kete ehehe to the weet h Nive the Security Marine A understuent below Credo with an expected return return of 15% on the C ulate the standard deviation of art porn Find the weight of Stock Bonds and is free