Question: Question 1 5 Points B C D 2 A pension fund manager is considering 3 mutual funds. 3 The first is a stock fund, the

Question 1

5 Points

B

C

D

2

A pension fund manager is considering 3 mutual funds.

3

The first is a stock fund, the second is a corporate bond fund,

4

and the fhird is a Treasury Bill fund.

5

The rate of return on the T-Bill fund is

5.00%

6

You have the following data on the two risky funds:

7

Expected

Standard

8

Fund

Return

Deviation

9

Bond

8.0%

0.2400

10

Stock

28.0%

0.3800

11

Correlation Coefficient (rho)

-.8000

What is the Covariance between the two assets in the optimal risky portfolio? COV = rho*SDstock*SDbond

COV = -0.07296

COV = -0.07796

COV = -0.07776

COV = 0.08296

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