Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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:
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is 0.11.
Expected
Return
19%
12
Required:
a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds?
a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return?
Req A1
Complete this question by entering your answers in the tabs below.
Reg A2
What are the investment proportions in the minimum-variance portfolio of the two risky funds?
Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.
Portfolio invested in the stock
Portfolio invested in the bond
Standard
Deviation
32%
15
Req A1
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
19%
12
Expected return
Standard deviation
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is 0.11.
< Req A1
Standard
Deviation
32%
15
Required:
a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds?
a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return?
Req A2
Complete this question by entering your answers in the tabs below.
Req A2 >
What are the expected value and standard deviation of the minimum-variance portfolio rate of return?
Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.
< Req A1
Req A2 >
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