Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. a pension fund manager is considering three mutual

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

90.2K

Verified Solution

Question

Accounting

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 funds that provides a safe return of 4%. The characteristics of the risky funds are as follows.

Stock Fund: Ret. (14.5%), Std. Dev (21%)

Bond Fund: Ret (7%), Std. Dev (10.5%), Correlation 0.3

a. What are the investment proportions in the minimum variance portfolio of the two risky funds, and what are the expected value and standard deviation of its rate of return.

b. Solve numerically for the proportions of each asset and for the expected return and the standard deviation of the optimal risky portfolio.

c. You require that your portfolio yield and expected return of 10%, and that it be efficient, that is, on the steepest feasible CAL. What is the standard deviation of your portfolio? What is the proportion invested in the money market fund and in each of the two risky assets

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students