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 5.4 %. The probability distributions of the risky funds are: Stock fund (S) Bond fund (B) Expected Return 15% Standard Deviation 8% 44% 38% The correlation between the fund returns is .0684. Suppose now that your portfolio must yield an expected return of 13% 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.) Answer is complete but not entirely correct. Standard deviation 23.68 % b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Proportion invested in the T-bill fund 13.43%

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 5.4 %. The probability distributions of the risky funds are: Stock fund (S) Bond fund (B) Expected Return 15% Standard Deviation 8% 44% 38% The correlation between the fund returns is .0684. Suppose now that your portfolio must yield an expected return of 13% 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.) Answer is complete but not entirely correct. Standard deviation 23.68 % b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Proportion invested in the T-bill fund 13.43%

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter13: Investing In Mutual Funds, Etfs, And Real Estate

Section: Chapter Questions

Problem 2FPE

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