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

50.1K

Verified Solution

Question

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 Standard Deviation
   Stock fund (S) 15%         44%
   Bond fund (B) 8%         38%

The correlation between the fund returns is .0684.

What is the reward-to-volatility ratio of the best feasible CAL?(Do not round intermediate calculations. Round your answerto 4 decimal places.)

  Reward-to-volatility ratio

Answer & Explanation Solved by verified expert

3.7 Ratings (503 Votes)

SEE THE See Answer

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

Transcribed Image Text

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 ReturnStandard Deviation Stock fund (S)15% 44% Bond fund (B)8% 38% The correlation between the fund returns is .0684. What is the reward-to-volatility ratio of the best feasible CAL?(Do not round intermediate calculations. Round your answerto 4 decimal places.) Reward-to-volatility ratio

	Expected Return	Standard Deviation
Stock fund (S)	15%	44%
Bond fund (B)	8%	38%