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?
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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: |
|
Expected Return |
Standard Deviation |
||
Stock fund (S) |
12 |
% |
41 |
% |
Bond fund (B) |
5 |
% |
30 |
% |
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. |
a. |
What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Standard deviation |
[removed]% |
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 |
[removed]% |
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 |
[removed]% |
Bonds |
[removed]% |
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