Question
The following data apply to Problems 8 12. A pension fund manager is considering three mutual funds. The first is a stock fund, the second
The following data apply to Problems 812.
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 sure rate of 5.5%. The probability distributions of the risky funds are:
Expected Return | Standard Deviation | |
Stock Fund (S) | 15% | 32% |
Bond Fund (B) | 9 | 23 |
The correlation between the fund returns is 0.15.
10) | What is the Sharpe ratio of the best feasible CAL? (LO 6-3) | ||||
| 11) Suppose now that your portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL. (LO 6-3)
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Please show ALL work!
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