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 sure rate of 5.4%. The probability distributions ofthe risky funds are:

    Expected Return   StandardDeviation
Stock fund (S)   15%   44%
Bond fund (B)   8%   38%
The correlation between the fund returns is 0.0684.

What is the Sharpe ratio of the best feasible CAL? (Do not roundintermediate calculations. Round your answer to 4 decimalplaces.)

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First we will have to solve the mix for the risky optimalportfolio Let Ws be the proportion of stock fund in therisky optimal 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 sure rate of 5.4%. The probability distributions ofthe risky funds are: Expected Return StandardDeviationStock fund (S) 15% 44%Bond fund (B) 8% 38%The correlation between the fund returns is 0.0684.What is the Sharpe ratio of the best feasible CAL? (Do not roundintermediate calculations. Round your answer to 4 decimalplaces.)