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 9%. The characteristics of the risky funds are as follows: Expected Return 17% Standard Deviation Stock fund (S) Bond fund (B) 30% 22 11 The correlation between the fund returns is 0.10. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Portfolio invested in the stock 0.3339 Portfolio invested in the bond 0.6661 Expected return Standard deviation
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 9%. The characteristics of the risky funds are as follows: Expected Return 17% Standard Deviation Stock fund (S) Bond fund (B) 30% 22 11 The correlation between the fund returns is 0.10. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Portfolio invested in the stock 0.3339 Portfolio invested in the bond 0.6661 Expected return Standard deviation
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 2FPE
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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 bond fund, and the third is a
| Expected Return | Standard Deviation | ||||||
| Stock fund (S) | 17 | % | 30 | % | |||
| Bond fund (B) | 11 | 22 | |||||
The correlation between the fund returns is 0.10.
Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)
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 9%. The characteristics of the risky funds are as follows:
Stock fund (S)
Bond fund (B)
Expected Return
17%
11
Standard Deviation
30%
22
The correlation between the fund returns is 0.10.
Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio.
(Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)
Portfolio invested in the stock
0.3339
Portfolio invested in the bond
0.6661
Expected return
Standard deviation
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