3. A pension fund manager is considering three mutual funds. The first is a stock fund,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
3. 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 5.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation 15% Stock fund (S) Bond fund (B) 9 32% 23 The correlation between the fund return is .15. A. Tabulate and draw the investment opportunity set of the two risky funds. Use investment proportions for the stock fund of 0% to 100% in increments of 20%. B. Compute the weights of stock fund and bond fund for the optimal risky portfolio. What is the expected return and standard deviation of the optimal risky portfolio? C. What is the Sharpe ratio of the best feasible CAL? D. Suppose now that your complete portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL. What is the standard deviation of your complete portfolio? What is the proportion invested in the T- bill fund and each of the two risky funds? 3. 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 5.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation 15% Stock fund (S) Bond fund (B) 9 32% 23 The correlation between the fund return is .15. A. Tabulate and draw the investment opportunity set of the two risky funds. Use investment proportions for the stock fund of 0% to 100% in increments of 20%. B. Compute the weights of stock fund and bond fund for the optimal risky portfolio. What is the expected return and standard deviation of the optimal risky portfolio? C. What is the Sharpe ratio of the best feasible CAL? D. Suppose now that your complete portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL. What is the standard deviation of your complete portfolio? What is the proportion invested in the T- bill fund and each of the two risky funds?
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
In home with hand sanitizers, the risk of catching a gastrointestinal illness from a sick child dropped 60 percent compared with the control families. This statement is consistent with: (RR = risk...
-
The cord passing over the two small pegs A and B of the board is subjected to a tension of 100 N. Determine the minimum tension P and the orientation ? of the cord passing over pegs C and D, so that...
-
Perform the monitoring and controlling tasks for one of the case studies provided in Appendix C. If you are working on a real team project, create relevant monitoring and controlling documents, such...
-
Compute the covariance and correlation coefficient between IBM and Kellogg (previous two questions). Are there any advantages to diversifying between IBM and Kellogg?
-
Beth Dale is the Director of Development for a nonprofit organization that depends largely on charitable gifts for its operations. Beth needs to assign four different staff people to make trips to...
-
Here are the comparative income statements of Martinez Development Corporation. \ table [ [ \ table [ [ MARTINEZ DEVELOPMENT CORPORATION ] , [ Comparative Income Statements ] , [ For the Years Ended...
-
Write a paper to analysis McDonald?s income statement and balance sheet. In the vertical analysis, you will measure performance against one variable: revenue in the income statement and assets in the...
-
Please help me with this Periodic inventory using FIFO, LIFO, and weighted average cost methods The units of an item available for sale during the year were as follows: There are 19 units of the item...
-
Mr Coetzee works for an advertising company, Litaba Ltd. In his spare time, he writes articles for an online news website, Lesedi News. On this website he publishes an article (which he wrote from...
-
Constance Backhouse's work sheds light on the historical barriers faced by marginalized groups in accessing the legal profession and challenges systemic biases within the judiciary (2021, p. 17). A...
-
Q3) How do calculated ratio compare to industry's ratios? Do you spot any area that could be a problem in the future? Explain
-
The government conducts juvenile programs to end recidivism, affecting the community and individuals. The main purpose of the camps is to ensure corrective facilities are available for offenders to...
-
Based on course reading, including the Dan Plesch book, previous major course readings, and maybe your country research, is how important is the liberal inheritance from the 1940s to the future of...
-
The purpose of this assignment is to development personal financial goals and utilize the time value of money (TVM) equation to assess investment options. For this assignment, create and submit the...
-
What are the key elements of a system investigation report?
-
Continuation of S10-5: cash budget (Learning Objective 3) Refer to S10-5. Grippers has $8,300 cash on hand on January 1. The company requires a minimum cash balance of $7,500. January cash...
-
Revise cash payments for purchases (Learning Objective 4) Refer to the original Whitewater Sporting Goods Data Set item 5. Suppose Whitewater Sporting Goods pays for 60% of inventory purchases in the...
-
Revise cash collections budget (Learning Objective 4) Turn to the original Whitewater Sporting Goods Data Set item 4. Suppose 70% of sales are cash and 30% are credit. Revise Whitewater's sales...
Study smarter with the SolutionInn App