Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question

am. 125.

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 5%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (8) Expected Return 22% 12 Sharpe ratio Standard Deviation 38% 16 The correlation between the fund returns is 0.10. What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.)
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Transcribed Image Text: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 5%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (8) Expected Return 22% 12 Sharpe ratio Standard Deviation 38% 16 The correlation between the fund returns is 0.10. What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.)
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