Question

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 8%. The probability distribution of the risky funds is as follows:

Expected Return | Standard Deviation | |||||

Stock fund
(S) |
22 | % | 37 | % | ||

Bond fund (B) |
14 | 23 | ||||

The correlation between the fund returns is 0.10.

**a-1.**
What are the investment proportions in the minimum-variance
portfolio of the two risky funds. **(Do not round
intermediate calculations. Enter your answers as decimals rounded
to 4 places.)**

**a-2.**
What is the expected value and standard deviation of its rate of
return? **(Do not round intermediate calculations. Enter your
answers as decimals rounded to 4 places.)**

Answer #1

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 8%. The probability distribution of the risky
funds is as follows: Expected Return Standard Deviation Stock fund
(S) 19 % 34 % Bond fund (B) 10 18 The correlation between the fund
returns is 0.11. a-1. What are the investment proportions...

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 8%. The probability distribution of the risky
funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
17
%
38
%
Bond fund (B)
12
17
The correlation between the fund returns is 0.13.
a-1. What are the investment proportions...

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 8%. The probability distribution of the risky
funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
18
%
35
%
Bond fund (B)
15
20
The correlation between the fund returns is 0.12.
a-1. What are the investment proportions...

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 8%. The probability distribution of the risky
funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
21
%
36
%
Bond fund (B)
13
%
22
%
The correlation between the fund returns is 0.13.
a-1. What are the...

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:
Expected Return
Standard Deviation
Stock fund (S)
21
%
28
%
Bond fund (B)
12
18
The correlation between the fund returns is 0.09.
Solve numerically for the proportions...

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 8%. The probability distribution of the risky
funds is as follows:
Expected Return
Standard Deviation
Stock fund
(S)
17
%
35
%
Bond fund (B)
14
18
The correlation
between the fund returns is 0.09.
Solve numerically for
the proportions...

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 9%. The probability distribution of the risky
funds is as follows:
Expected Return Standard Deviation
Stock fund (S) 17 % 38 %
Bond fund (B) 13 18
The correlation between the fund returns is 0.12.
Solve numerically for the proportions of...

Problem 7-4 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 8%. The probability distribution
of the risky funds is as follows: Expected Return Standard
Deviation Stock fund (S) 19 % 32 % Bond fund (B) 12 15 The
correlation between the fund returns is 0.11. a-1. What are the...

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 5%. The probability distribution of the risky
funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
17
%
30
%
Bond fund (B)
11
22
The correlation between the fund returns is 0.10.
What is the Sharpe ratio of...

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
Standard Deviation
Stock fund (S)
16
%
35
%
Bond fund (B)
12
15
The correlation between the fund returns is 0.13.
a-1. What are the investment proportions in the
minimum-variance portfolio...

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