A pension fund manager is considering three mutual funds. The first is a stock fund, the second
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Question:
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 7%. The characteristics of the risky funds are as follows:
Expected Return | Standard Deviation | ||||||
Stock fund (S) | 23 | % | 39 | % | |||
Bond fund (B) | 12 | 17 | |||||
The correlation between the fund returns is 0.10.
Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio.
Portfolio invested in the stock
Portfolio invested in the bond
Expected Return
Standard Deviation
Related Book For
Business Statistics Communicating With Numbers
ISBN: 9780078020551
2nd Edition
Authors: Sanjiv Jaggia, Alison Kelly
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