Question

1) You are a fund manager considering two risky assets that have a covariance of 20, a stock fund with an expected return of 17% and a standard deviation of 21%, a bond fund with an expected return of 7% and a standard deviation of 5%, and a T-Bill fund with a return of 6%.

a) What are the investment proportions of the two risky assets in the optimal portfolio?

b) What is the expected value of its rate of return?

Answer #1

1. Proportion of x - 0.5357, Proportioned y - 0.4643

2. 12.36%

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 4.8%. The probability distributions of
the risky funds are:
expected return standard deviation
Stock Fund ( S )---------18%-------------38%
Bond Fund ( B )----------9----------------32
the correlation between the fund returns is .13
Standard deviation of optimal risky portfolio is 30.92%....

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...

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...

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...

A pension fund manager is considering 3 mutual funds. The 1st is
a stock fund, the 2nd is a long-term government and corporate bond
fund, and the 3rd 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 the minimum-variance...

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 7%. The probability distribution of the risky
funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
19
%
31
%
Bond fund (B)
14
23
The correlation between the fund returns is 0.10.
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 4.5%. The probability distribution of the
risky funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
15%
35%
Bond fund (B)
6
29
The correlation between the fund returns is 0.15.
Solve numerically for the proportions of each 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 4.5%. The probability distribution of the
risky funds is as follows:
Expected
Return
Standard
Deviation
Stock fund (S)
15%
35%
Bond fund (B)
6
29
The correlation between the fund returns is 0.15.
Solve numerically for the proportions of each asset...

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