Business, 11.03.2020 22:09 OKgoogle

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%.

Expected Return Standard Deviation

Stock fund (S) 15 % 32 %

Bond fund (B) 9 % 23 %

The correlation between the fund returns is 0.15.

a) Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.)

b) What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.)

c) Suppose now that your portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL.

1- What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
2- What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
3-What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Answers: 3

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A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a...