A pension fund manager is considering 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 7%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 16% 12 Standard Deviation 38% 21 The correlation between the fund returns is 0.12. Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.

A pension fund manager is considering 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 7%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 16% 12 Standard Deviation 38% 21 The correlation between the fund returns is 0.12. Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter13: Investing In Mutual Funds, Etfs, And Real Estate

Section: Chapter Questions

Problem 5FPE

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