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 3.0%. The probability distributions of the risky funds are
What is the standard deviation of your portfolio?
What is the proportion invested in the T-bill fund
What is the proportion invested in each of the two risky funds?
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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 sure rate of 3.0%. The probability distributions of the risky funds are: Save your time - order a paper!Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines Order Paper Now |
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Expected Return |
Standard Deviation |
||
|
Stock fund (S) |
12 |
% |
41 |
% |
|
Bond fund (B) |
5 |
% |
30 |
% |
|
The correlation between the fund returns is .0667. |
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Suppose now that your portfolio must yield an expected return of 9% and be efficient, that is, on the best feasible CAL. |
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a. |
What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
|
Standard deviation |
% |
|
b-1. |
What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
|
Proportion invested in the T-bill fund |
% |
|
b-2. |
What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) |
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|
Proportion Invested |
|
Stocks |
% |
|
Bonds |
% |
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