All questions, if not otherwise specified, are based on the following information. A fund manager is...

Transcribed Image Text:

All questions, if not otherwise specified, are based on the following information. A 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 Expected Return Stock Fund Bond Fund 20% 12% The correlation between the fund returns is 0.1 rho rf 0.1 8% Standard Deviation 30% 15% To answer the questions, please round the answers to two decimal places. For example, if you answer is 1.95%, please fill 1.95 in the slot. If you answer is 11.95%, please fill 11.95 in the slot. When the answer is a Sharpe ratio, don't use the percentage format. For example, you should fill in 0.58 in the slot if you get a Sharpe ratio of 0.58. Before you start this problem set, please help yourself understand the procedures in 04 Efficient Frontier.xlsx. You have 5 attempts. You are encouraged to start early and try again if you don't get the right answer. As always, you are welcome to discuss the method (but not the numerical answers) with your classmates and/or schedule an office hour with me. All questions, if not otherwise specified, are based on the following information. A 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 Expected Return Stock Fund Bond Fund 20% 12% The correlation between the fund returns is 0.1 rho rf 0.1 8% Standard Deviation 30% 15% To answer the questions, please round the answers to two decimal places. For example, if you answer is 1.95%, please fill 1.95 in the slot. If you answer is 11.95%, please fill 11.95 in the slot. When the answer is a Sharpe ratio, don't use the percentage format. For example, you should fill in 0.58 in the slot if you get a Sharpe ratio of 0.58. Before you start this problem set, please help yourself understand the procedures in 04 Efficient Frontier.xlsx. You have 5 attempts. You are encouraged to start early and try again if you don't get the right answer. As always, you are welcome to discuss the method (but not the numerical answers) with your classmates and/or schedule an office hour with me.