A pension fund manager is considering three mutual funds. The first is a stock fund, the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (8) Expected Return 16% 12 The correlation between the fund returns is 0.12. a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? (Do not round Intermediate calculations. Enter your answers as decimals rounded to 4 places.) Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Standard Deviation 38% 21 a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? (Do not round Intermediate calculations. Enter your answers as decimals rounded to 4 places.) Rate of Return A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (8) Expected Return 16% 12 The correlation between the fund returns is 0.12. a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? (Do not round Intermediate calculations. Enter your answers as decimals rounded to 4 places.) Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Standard Deviation 38% 21 a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? (Do not round Intermediate calculations. Enter your answers as decimals rounded to 4 places.) Rate of Return
Expert Answer:
Answer rating: 100% (QA)
SOLUTION a1 To find the investment proportions in the minimumvariance portfolio of the two risky fun... View the full answer
Related Book For
Business Statistics Communicating With Numbers
ISBN: 9780078020551
2nd Edition
Authors: Sanjiv Jaggia, Alison Kelly
Posted Date:
Students also viewed these finance questions
-
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...
-
Boomtimes Oil Company leased 900 acres of land on March 14, 2019. The lease calls for Boomtimes to pay an annual delay rental of $8 per acre if drilling hasn't commenced within 3 years. No drilling...
-
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...
-
A nutritionist at the Food and Drug Administration is studying the effects of cereal marketing on family meal choices. In particular, she would like to understand how cereal manufacturers market...
-
Assume you are given the following relationships for the Brauer Corporation: Calculate Brauer's profit margin and debt ratio. Sales/Total assets Return on assets (ROA) Return on equity (ROE) 1.5x 3%...
-
A cascade of six mixer-settler units is available, each unit consisting of a 10-ft-diameter by 10-ft-high mixing vessel equipped with a 20-hp agitator, and a 10-ft-diameter by 40-ft-long settling...
-
The chi-square distribution is symmetric. In Exercises 11 and 12, determine whether the statement is true or false. If the statement is false, rewrite it as a true statement.
-
A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure on a large-scale integrated plant that would provide expected cash flows of $6.4 million per...
-
Equivalent Units of Production and Related Costs The charges to Work in Process-Assembly Department for a period, together with information concerning production, are as follows. All direct materials...
-
Roberta Santos, age 41, is single and lives at 120 San-borne Avenue, Springfield, IL 60781. Her Social Security number is 123-45-6789. Roberta has been divorced from her former husband, Wayne, for...
-
What is an operating system. b) What would be the functions of an operating system.
-
Define hearing versus listening.
-
What are the contexts for business and professional excellence?
-
______________ is the general term for the discussion, determination, and deliberation processes that attempt to decide what is right or wrong, what others should or should not do, and what is...
-
Explain the difference between regulative rules and constitutive rules.
-
_____________ requires you to research opportunities in your major that correspond with your goals and priorities.
-
You have borrowed $70,000 to purchase a rental property. You plan to make monthly payments over a period of 15 years. The bank has offered you an interest rate of 9% compounded monthly. Calculate the...
-
Using the theoretical sampling strategy, how many samples of size 4 (n = 4) can be drawn from a population of size: (a) N = 5? (b) N = 8? (c) N = 16? (d) N = 50?
-
Executive compensation has risen dramatically beyond the rising levels of an average worker's wage over the years. This has been a hot topic for discussion, especially with the crisis in the...
-
An economist wants to test whether the median hourly wage is less than $22. a. Specify the competing hypotheses for the test. b. At the 5% significance level, what is the decision rule? Assume the...
-
Consider the following table, which lists a portion of the monthly unemployment rates (seasonally adjusted) in California from 2007-2010. Year.......... Month......... Unemployment Rate (%)...
-
The upper curve in the boiling point diagram is called (a) The saturated vapour curve (b) The dew point curve (c) The saturated liquid curve (d) Both (a) and (b).
-
A vertical cylinder containing helium gas is filled with a piston of \(50 \mathrm{~kg}\) mass and crosssectional area of \(0.025 \mathrm{~m}^{2}\). If the atmospheric pressure outside the cylinder is...
-
The Joule-Thomson coefficient for any gas at inversion point is (a) 1 (b) 0 (c) 2 (d) 3
Study smarter with the SolutionInn App