1. A pension fund manager is considering three mutual funds. The first is a stock fund,...

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1. A pension fund manager is considering three mutual funds. Thefirst is a stock fund, the second is a long-term government andcorporate bond fund, and the third is a T-bill money market fundthat yields a sure rate of 5.5%. The probability distributions ofthe risky funds are:
Expected Return Standard Deviation
Stock fund (S) 15 % 32 %
Bond fund (B) 9 % 23 %

The correlation between the fund returns is 0.15.

What is the Sharpe ratio of the best feasible CAL?
Sharpe ratio=
2. The standard deviation of the market-index portfolio is 10%.Stock A has a beta of 2.50 and a residual standard deviation of20%.

a. Calculate the total variance for an increase of0.10 in its beta. (Do not round intermediate calculations.Round your answer to the nearest whole number.)

b. Calculate the total variance for an increase of1.24% in its residual standard deviation. (Do not roundintermediate calculations. Round your answer to the nearest wholenumber.)

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1. A pension fund manager is considering three mutual funds. Thefirst is a stock fund, the second is a long-term government andcorporate bond fund, and the third is a T-bill money market fundthat yields a sure rate of 5.5%. The probability distributions ofthe risky funds are:Expected ReturnStandard DeviationStock fund (S)15%32%Bond fund (B)9%23%The correlation between the fund returns is 0.15.What is the Sharpe ratio of the best feasible CAL?Sharpe ratio=2. The standard deviation of the market-index portfolio is 10%.Stock A has a beta of 2.50 and a residual standard deviation of20%.a. Calculate the total variance for an increase of0.10 in its beta. (Do not round intermediate calculations.Round your answer to the nearest whole number.)b. Calculate the total variance for an increase of1.24% in its residual standard deviation. (Do not roundintermediate calculations. Round your answer to the nearest wholenumber.)

	Expected Return		Standard Deviation
Stock fund (S)	15	%	32	%
Bond fund (B)	9	%	23	%