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You have S1,000,000 invested in a mutual fund (Existing Fund). You are considering liquidating $400,000...

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Accounting

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You have S1,000,000 invested in a mutual fund (Existing Fund). You are considering liquidating $400,000 worth of the Existing Fund and Purchasing a Beta Zero Fund (BZ Fund), which manages an equity long short portfolio that targets a market risk of zero. Your financial adviser provides you with the forecasted information below: 13. Expected Standard Deviation of Annual Returns 16 % 25% Expected Annual Returns Correlation with Fund Beta. Existing Fund 0.8 1.00 0.00 Existing Fund BZ Fund 10% 4% Investing in the BZ Fund changes your overall portfolio and you are deciding whether to liquidate part of the existing fund and invest in the BZ Fund. Call the combination of the Existing Fund and the BZ Fund the "New Portfolio" Assuming that you liquidate part of the Existing Fund, calculate the following: (15 pts total) The expected annual return of the New Portfolio? (5 pts) The expected standard deviation of the New Portfolio (5 pts) b. c. From your calculations, should you liquidate part of the Existing Fund and use the proceeds to invest in the BZ Fund? Explain precisely. (5 pts)

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