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 4.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 15% 40% Bond fund (B) 9% 31% The correlation between the fund returns is 0.15. Problem 6-11 (Algo) Suppose now that your portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL. Required: a. What is the standard deviation of your portfolio?
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 4.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 15% 40% Bond fund (B) 9% 31% The correlation between the fund returns is 0.15. Problem 6-11 (Algo) Suppose now that your portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL. Required: a. What is the standard deviation of your portfolio?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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
| Expected Return | Standard Deviation | |
|---|---|---|
| Stock fund (S) | 15% | 40% |
| Bond fund (B) | 9% | 31% |
The correlation between the fund returns is 0.15.
Problem 6-11 (Algo)
Suppose now that your portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL.
Required:
a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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