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 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 must yield an expected return of
12% and be efficient, that is, on the best feasible CAL.

**a.** What is the standard deviation of your
portfolio? **(Do not round intermediate calculations. Round
your answer to 2 decimal places.)**

Standard deviation
%

**b-1.** What is the proportion invested in the
T-bill fund? **(Do not round intermediate calculations. Round
your answer to 2 decimal places.)**

Proportion invested in the T-bill fund
%

**b-2.** What is the proportion invested in each of
the two risky funds? **(Do not round intermediate
calculations. Round your answers to 2 decimal places.)**

Proportion Invested | |

Stocks | % |

Bonds | % |

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 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 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.
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)
20%
35%
Bond Fund (B)
11%
15%
The correlation between the fund returns is 0.09.
You require that your portfolio yield an expected...

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 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...

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...

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 3.0%. The probability distribution of risky
funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
12%
41%
Bond fund (B)
5
30
The correlation between the fund returns is 0.18.
Solve numerically for the proportions of each asset and...

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