A pension fund is considering investing in a portfolio of stocks and bonds. The portfolio will be
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A pension fund is considering investing in a portfolio of stocks and bonds. The portfolio will be used to meet a future liability that the fund will have to pay out in 20 years. The fund expects to need $10 million in 20 years to pay off the liability. The fund plans to invest $7 million in stocks and $3 million in bonds. The expected return on stocks is 12% per annum and the expected return on bonds is 6% per annum. The standard deviation of the returns for stocks is 15% and for bonds is 8%. What is the expected value and standard deviation of the return on the portfolio? Show all calculations.
Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old
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