Reference no: EM13751050
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 3.0%. The probability distributions of the risky funds are
What is the standard deviation of your portfolio?
What is the proportion invested in the T-bill fund
What is the proportion invested in each of the two risky funds?
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 3.0%. The probability distributions of the risky funds are:
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Expected Return
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Standard Deviation
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Stock fund (S)
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12
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%
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41
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%
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|
Bond fund (B)
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5
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%
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30
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%
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|
The correlation between the fund returns is .0667.
Suppose now that your portfolio must yield an expected return of 9% and be efficient, that is, on the best feasible CAL.
What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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Proportion Invested
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Stocks
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%
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Bonds
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%
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