Probability distribution of the risky funds

Assignment Help Financial Management

Reference no: EM13894709

The following data apply to Problems 4 through 10: A pension fund manager is con- sidering three mutual funds. The first is a stock fund, the second is a long-term govern- ment 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) 20% 30%

Bond fund (B) 12% 15%

The correlation between the fund returns is .10.

You require that your portfolio yield an expected return of 14%, and that it be efficient, on the best feasible CAL.

a) What is the standard deviation of your portfolio?

b) What is the proportion invested in the T-bill fund and each of the two risky funds?

Reference no: EM13894709

Questions Cloud

The after-tax cost of debt : The before-tax cost of debt for a firm which has a 40 percent marginal tax rate is 12 percent. The after-tax cost of debt is

Identify three issues that such a team might address : Explain why such a team is likely to be collaborative. Identify three issues that such a team might address, and explain why those issues would need feedback and iteration.

Treasury strips-what is the yield to maturity : A Treasury STRIPS is quoted at 61.159 and has 10 years until maturity. What is the yield to maturity?

Evaluating initial investment for capital budgeting project : In evaluating the initial investment for a capital budgeting project:

Probability distribution of the risky funds : The following data apply to Problems 4 through 10: A pension fund manager is con- sidering three mutual funds. The first is a stock fund, the second is a long-term govern- ment and corporate bond fund, and the third is a T-bill money market fund that..

Identify factors used in those industries : 1.Choose two industries that you believe are very different. Identify factors used in those industries that in the short run are (a) fixed; (b) variable.

Define the different types of interaction styles : Define the different types of interaction styles

Describe three creative ways you can respond to challenge : Besides resigning yourself to failing in a horrible experience, describe three creative ways you can respond to this challenge. How might this situation differ at work from that at school?

Weighted average cost of capital : Coleman Technologies Inc. Cost of Capital Coleman Technologies is considering a major expansion program that has been proposed by the company’s information technology group. Before proceeding with the expansion, the company must estimate its cost of ..

User Account

All Pages