CLASS 2 QUESTIONS A pension fund manager is considering three mutual funds. The first is a...

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CLASS 2 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 yields a sure rate of 5.5%. The probability distributions of the risky funds are: Stock fund (S) Bond fund (B) Expected Return 15% 9 Standard Deviation 32% 23 The correlation between the fund returns is .15. 8. Tabulate and draw the investment opportunity set of the two risky funds. Use invest- ment proportions for the stock fund of 0% to 100% in increments of 20%. What expected return and standard deviation does your graph show for the minimum-variance portfolio? (LO 6-2) 9. Draw a tangent from the risk-free rate to the opportunity set. What does your graph show for the expected return and standard deviation of the optimal risky portfolio? (LO 6-3) 10. What is the Sharpe ratio of the best feasible CAL? (LO 6-3) CLASS 2 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 yields a sure rate of 5.5%. The probability distributions of the risky funds are: Stock fund (S) Bond fund (B) Expected Return 15% 9 Standard Deviation 32% 23 The correlation between the fund returns is .15. 8. Tabulate and draw the investment opportunity set of the two risky funds. Use invest- ment proportions for the stock fund of 0% to 100% in increments of 20%. What expected return and standard deviation does your graph show for the minimum-variance portfolio? (LO 6-2) 9. Draw a tangent from the risk-free rate to the opportunity set. What does your graph show for the expected return and standard deviation of the optimal risky portfolio? (LO 6-3) 10. What is the Sharpe ratio of the best feasible CAL? (LO 6-3)