Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

There are three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market

There are 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: (Risk free rate 8%)

Expected Return Standard Deviation
Stock fund (S) 18% 37%
Bond fund (B) 14% 19%
The correlation between the fund returns is 0.11.

a) What are the proportions of the optimal risky portfolio invested in Stock Fund and Bond Fund in , Ws and WB? Also, what are the mean and standard deviation (rks) of the portfolio, E(rp) and sp ?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Investment Writing Handbook

Authors: Assaf Kedem

1st Edition

1119356725, 978-1119356721

More Books

Students also viewed these Finance questions