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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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:
Expected
Return
20%
12
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 14%, and that it be efficient, that is, on the
steepest feasible CAL:
Required A
Standard
Deviation
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 B
Money market fund
Stocks
Bonds
30%
15
What is the proportion invested in the money market fund and each of the two risky funds?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Proportion
Invested
%
%
%
< Required A
Required B >
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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 8%. The characteristics of the risky funds are as follows: Expected Return 20% 12 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 14%, and that it be efficient, that is, on the steepest feasible CAL: Required A Standard Deviation 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 B Money market fund Stocks Bonds 30% 15 What is the proportion invested in the money market fund and each of the two risky funds? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Proportion Invested % % % < Required A Required B >
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