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 5%. The probability distribution of the risky funds is as follows:

Expected Return | Standard Deviation | |
---|---|---|

Stock Fund (S) |
20% | 35% |

Bond Fund (B) | 11% | 15% |

The correlation between the fund returns is 0.09.

You require that your portfolio yield an expected return of 12%, 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 (stocks, bonds,
t-bills)? **(Round your answers to 2 decimal
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 percent. The probability distribution of
the risky funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
.20
.30
Bond fund (B)
.12
.15
The correlation between the fund returns is 0.10.
What is the reward-to-variability ratio of 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 sure rate of 4.3%. The probability distributions of
the risky funds are:
Expected Return Standard Deviation
Stock fund (S) 13 % 34 %
Bond fund (B) 6 % 27 %
The correlation between the fund returns is .0630.
Suppose now that your portfolio...

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 sure rate of 5.3%. The probability distributions of
the risky funds are:
Expected Return
Standard Deviation
Stock fund (S)
14
%
43
%
Bond fund (B)
7
%
37
%
The correlation between the fund returns is .0459.
Suppose now that your portfolio...

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 sure rate of 4.7%. The probability distributions of the risky
funds are:
Expected Return
Standard Deviation
Stock fund (S)
17
%
37
%
Bond fund (B)
8
%
31
%
The correlation between the fund returns is .1065.
Suppose now that your portfolio...

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 sure rate of 5.4%. The probability distributions of
the risky funds are:
Expected Return
Standard Deviation
Stock fund (S)
15
%
44
%
Bond fund (B)
8
%
38
%
The correlation between the fund returns is .0684.
Suppose now that your portfolio...

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 sure rate of 5.5%. The probability distributions of
the risky funds are: Expected Return Standard Deviation Stock fund
(S) 15 % 32 % Bond fund (B) 9 % 23 % The correlation between the
fund returns is 0.15. Suppose now that your portfolio...

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 sure rate of 5.5%. The probability distributions of
the risky funds are:
Expected Return
Standard Deviation
Stock fund (S)
15
%
32
%
Bond fund (B)
9
%
23
%
The correlation between the fund
returns is 0.15.
a.
What...

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 coefficient between the fund returns is
0.10.
You require that your portfolio yield an...

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 5.5%. The probability distribution of the
risky funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
15%
32%
Bond fund (B)
9
23
The correlation between the fund returns is 0.15.
Solve numerically for the proportions of each...

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