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

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Finance

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 rate of 5.6%. The probability distribution of therisky funds is as follows:
   expected return    standard deviation
Stock fund s    17%    46%
bond fund b    8% 40%
The correlationbetween the fund returns is 0.16.
Solve numerically forthe proportions of each asset and for the expected return andstandard deviation of the optimal risky portfolio

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To find the fraction of wealth to invest in Stock fund that willresult in the risky portfolio with maximum Sharpe ratio See Answer

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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 rate of 5.6%. The probability distribution of therisky funds is as follows: expected return standard deviationStock fund s 17% 46%bond fund b 8% 40%The correlationbetween the fund returns is 0.16.Solve numerically forthe proportions of each asset and for the expected return andstandard deviation of the optimal risky portfolio