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 th is a money market fund that provides a safe return of 5%. The characteristics of the risky funds are as follows: Stock fund (5) 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 round 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 th is a money market fund that provides a safe return of 5%. The characteristics of the risky funds are as follows: Stock fund (5) 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 round to 4 places.)
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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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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