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 thirdis a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows:Stock fund (S)Bond fund (B)ExpectedReturn20%12StandardDeviation30%15The correlation between the fund returns is 0.10.You require that your portfolio yield an expected return of 14%, and that it be efficient, that is, on the steepest feasible CAL.Required:a. What is the standard deviation of your portfolio?b. What is the proportion invested in the money market fund and each of the two risky funds?Complete this question by entering your answers in the tabs below.Required ARequired BWhat is the standard deviation of your portfolio?Note: Round your answer to 2 decimal places.Standard deviation0.15%

Part a:Cov(S,B) = r(S,B) * SD of Stock Fund * SD of Bond FundCov(S,B) is Covariance between Stock…

Answered: A pension fund manager is considering…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 5P

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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 money market fund that provides a safe return of 4%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.09. You require that your portfolio yield an expected return of 14%, and that it be efficient, that is, on the steepest feasible CAL. 17% 14 35% 18. Required: a. What is the standard deviation of your portfolio? b. What is the proportion invested in the money market fund and each of the two risky funds?
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) The correlation between the fund returns is 0.10. You require that your portfolio yield an expected return of 16%, and that it be efficient, that is, on the steepest feasible CAL. a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.) Standard deviation Expected Return Standard Deviation 198 31% 23 14 Money market fund Stocks Bonds 19.33 % b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.) Proportion Invested
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 6%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 21% 13 The correlation between the fund returns is 0.13. You require that your portfolio yield an expected return of 11%, and that it be efficient, that is, on the steepest feasible CAL. Required: a. What is the standard deviation of your portfolio? b. What is the proportion invested in the money market fund and each of the two risky funds? Required A Standard Deviation 36% 22 Complete this question by enter your answers in the tabs below. Required B Money market fund Stocks Bonds What is the proportion invested in the money market fund and each of the two risky funds? Note: Round your answers to 2 decimal places. Proportion Invested % % %
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 4%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 24% 12 The correlation between the fund returns is 0.13. Standard Deviation You require that your portfolio yield an expected return of 12%, and that it be efficient, that is, on the steepest feasible CAL. Required A Required: a. What is the standard deviation of your portfolio? b. What is the proportion invested in the money market fund and each of the two risky funds? 30% 19 Complete this question by entering your answers in the tabs below. Required B Money market fund Stocks Bonds What is the proportion invested in the money market fund and each of the two risky funds? Note: Round your answers to 2 decimal places. Proportion Invested % % %
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 4%. Thecharacteristics of the risky funds are as follows: The correlation between the fund returns is 0.13. Yourequire that your portfolio yield an expected return of 12%, and that it be efficient, that is, on the steepestfeasible CAL. a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.)Standard deviation b. What is the proportion invested in the money market fund and each of the two riskyfunds? (Round your answers to 2 decimal 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 4%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (8) Standard deviation Expected Return Standard Deviation 19% 10 The correlation between the fund returns is 0.11. You require that your portfolio yield an expected return of 12%, and that it be efficient, that is, on the steepest feasible CAL. a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.) Money market fund Stocks Bonds b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.) 34% 18 Proportion Invested % % %
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 4%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation 234 14 294 17 Stock fund (5) Bond fund (8) The correlation between the fund returns is 0.12. You require that your portfolio yield an expected return of 12%, and that it be efficient, that is, on the steepest feasible CAL a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places) Standard deviation b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.) Money market fund Stocks Bonds Proportion Invested *** Check my work
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 rate of 6%. The probability distribution of the risky funds is as follows: E(r) st. dev. stock fund .24 .33 bond fund .14 .22 The correlation between the fund returns is 0.14. You require that your portfolio yield an expected return of 16%, and that it be efficient, on the best feasible CAL. a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.) b. What is the proportion invested in the T-bill fund and each of the two risky funds? (Round your answers to 2 decimal 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 8%. The characteristics of the risky funds are as follows: Stock fund (5) Bond fund (D) Expected Return 20% 12 The correlation between the fund returns is 0.10. You require that your portfolio yield an expected return of 14%, and that it be efficient, that is, on the steepest feasible CAL a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.) T-bill fund Stocks Bonda Standard Deviation 30% 15 Standard deviation 13.92% b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.) Proportion Invested
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 6%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 24% 14 Standard Deviation 33% 22 The correlation between the fund returns is 0.14. You require that your portfolio yield an expected return of 16%, and that it be efficient, that is, on the steepest feasible CAL. Required: a. What is the standard deviation of your portfolio? b. What is the proportion invested in the money market fund and each of the two risky funds? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below.
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 6%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 21% 12 Standard Deviation 28% 18 The correlation between the fund returns is 0.09. Sharpe ratio 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.)
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 6%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 24% 14 The correlation between the fund returns is 0.14. Standard Deviation You require that your portfolio yield an expected return of 16%, and that it be efficient, that is, on the steepest feasible CAL. Required A Required: a. What is the standard deviation of your portfolio? b. What is the proportion invested in the money market fund and each of the two risky funds? 33% 22 Complete this question by entering your answers in the tabs below. Required B Money market fund Stocks Bonds What is the proportion invested in the money market fund and each of the two risky funds? Note: Round your ar vers to 2 decimal places. Proportion Invested % %

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