Question

A stock fund has an expected return of 15% and a standard deviation of 25% and a bond fund has an expected return of 10% and a standard deviation of 10%. The correlation between the two funds is 0.25. The risk free rate is 5%. What is the (a) expected return and (b) standard deviation of the portfolio with 70% weight in the stock portfolio and 30% weight in the bond portfolio?

Answer #1

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Q1) A stock fund has an expected return of 15% and a standard
deviation of 25% and a bond fund has an expected return of 10% and
a standard deviation of 10%. The correlation between the two funds
is 0.25. The risk free rate is 5%. What is the (a) expected return
and (b) standard deviation of the portfolio with 70% weight in the
stock portfolio and 30% weight in the bond portfolio?
Q2) The variance of Stock A is...

You have a stock fund with an expected return of 12% and a
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What is the expected return of the optimal portfolio? Answer in
percentage, with one decimal place. Answer:

1a. Suppose that Apple stock has an expected return of 10% and a
standard deviation of returns of 25%. The risk-free rate on the
economy (measured as the yield on a one-year Treasury bond) is 5%.
What is the Sharpe ratio of Apple stock?.
1b. Suppose that the only risky asset you are interested in
holding is Apple stock. However, you would prefer to hold a
portfolio with more risk. Specifically, you would like to hold a
portfolio with return...

A stock fund has a standard deviation of 20% and a bond fund has
a standard deviation of 8%. The correlation of the two funds is
0.11
#1) What is the weight of the stock fund in the minimum variance
portfolio?
#2) What is the standard deviation of this minimum variance
portfolio?

A stock fund has a standard deviation of 20% and a bond fund has
a standard deviation of 8%. The correlation of the two funds is
0.11
#1) What is the weight of the stock fund in the
minimum variance portfolio?
#2) What is the standard deviation of this minimum variance
portfolio?
#1. weight of stock fund = 1.25%
#1. weight of stock fund = 10.82%
#1. weight of stock fund = 24.21%
#2. standard deviation of minimum-variance portfolio = 7.68%...

Stock A has an expected return of 18% and a standard deviation
of 33%. Stock B has an expected return of 13% and a standard
deviation of 17%. The risk-free rate is 3.6% and the correlation
between Stock A and Stock B is 0.2. Build the optimal risky
portfolio of Stock A and Stock B. What is the standard deviation of
this 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 rate of 3%. The probability distribution of the funds
is as follows:
Expected Return
Standard Deviation
Stock Fund
20%
40%
Bond Fund
10%
15%
Risk-free
3%
Correlation
20%
Find the investment proportions in the minimum variance
portfolio (MVP) of the two risk asset...

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:
FUND
EXPECTED
RETURN
STANDARD DEVIATION
Stock
(S)
20%
30%
Bond
(B)
12%
15%
NOTE: The correlation between the fund returns is
.10.
What are the investment proportions in the minimum-variance...

Expected Return Standard
Deviation
Stocks, S
14
30
Bonds, B 6
15
The correlation between stocks and bonds is ρ(S,B) = 0.05
Note: I've entered the expected returns and standard deviations
as whole numbers (not decimals)
Treat the risk-free rate as the number 2 not 0.02 or 2%.
The risk-free rate is 2 percent. The CAL that is tangent to the
portfolio frontier of stock and bonds has an expected return equal
to 9.5 percent.
You wish to...

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.
What are the investment proportions in...

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