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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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 5.5%. The probability
distributions of the risky funds are:
Expected Return Standard Deviation
17%
34%
11%
25%
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is 0.15.
Required:
What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.)
Sharpe ratio](https://content.bartleby.com/qna-images/question/48daf3b6-4039-44ea-9ed6-c1364bbb5763/287493c1-00da-4f6c-9897-3b30f3aa3e18/w63ty5f_thumbnail.jpeg)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
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
17%
34%
11%
25%
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is 0.15.
Required:
What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.)
Sharpe ratio
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