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What is investment proportion in the mvp of two risky funds

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A pension fund manager is considering two mutual funds. The first is a stock fund and the second is a long-term corporate bond fund. 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 return is 0.10.

Question a) You require that your portfolio is the minimum-variance portfolio (MVP) of the two risky funds.

  1. What is the investment proportion in the MVP of the two risky funds?
  2. What is the expected value and standard deviation of MVP's rate of return?

Question b) You require that your portfolio yields an expected return of 14% and that it be efficient.

  1. What is the investment proportion in that portfolio of the two risky funds?
  2. What is the standard deviation of that portfolio's rate of return?

Reference no: EM132545168

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