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

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

60.1K

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 rate of 5%. The probability distribution of the riskyfunds is as follows:

EXPECTED RETURNSTANDARD DEVIATION
STOCK FUND (S)20%35%
BOND FUND (B)1115

The correlation between the fund returns is 0.09.

What is the Sharpe ratio of the best feasible CAL? (Do not roundintermediate calculations. Enter your answers as decimals roundedto 4 places.)

Answer & Explanation Solved by verified expert
4.2 Ratings (743 Votes)
To find the fraction of wealth to invest in Stock fund that willresult in the risky portfolio with maximum Sharpe ratio thefollowing formula    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

Other questions asked by students

Basic Math
1.2K views

Complete the following table Use Exhibit 1 B Round time value factors to 3 decimal...

Advance Math
1.2K views

1. Locate a root of sin(x)=x2 where x is in radians. Use a graphical technique and...

Biology
1.2K views

Label the chart to review the major types of microbial associations Nonsymbiotic Synergism Organisms live...

Biology
1.2K views

One way that single-gene diseases differ from other diseases is thatthey affect consecutive generations.they occur...

Basic Math
1.2K views

Assume that a hypothesis test will be conducted using significance level a = .01 and...

Algebra
1.2K views

is the dependent variable decide which variable is the independent variable and whic Choose the...

Accounting
1.2K views

Current Attempt in Progress Restate the following income statement for a retailer in...

Accounting
1.2K views

Please do step by step calculation Sheridan Corporation, which uses ASPE, manufactures replicators....

Accounting
1.2K views

Exercise 8-6 (Algo) Selling and Administrative Expense Budget [LO8-7] Weller Company's budgeted unit sales for...

Accounting
1.2K views

Tax Return Problem I 7-63 on page 7-43 Peter and Amy Jones 2015 Form 8283...

Accounting
1.2K views

If i sold 1,000 items of inventory for $30 each by cash (GST exclusive) then...

Accounting
1.2K views

The adjusted trial balance of C.S. Financial Planners appears below. .s. Financial Planners Adjusted Trial...