A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 3.0%. The probability distributions of the risky funds are
What is the standard deviation of your portfolio?
What is the proportion invested in the T-bill fund
What is the proportion invested in each of the two risky funds?
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 3.0%. The probability distributions of the risky funds are:
|
|
Expected Return
|
Standard Deviation
|
|
Stock fund (S)
|
12
|
%
|
41
|
%
|
|
Bond fund (B)
|
5
|
%
|
30
|
%
|
|
The correlation between the fund returns is .0667.
Suppose now that your portfolio must yield an expected return of 9% and be efficient, that is, on the best feasible CAL.
What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
|
Proportion Invested
|
|
Stocks
|
%
|
|
Bonds
|
%
|