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 4.2%. The probability distributions of the risky funds are: Expected Return 12% 5% Standard Deviation 33% 26% Stock fund (S) Bond fund (B) The correlation between the fund returns is .0308. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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 4.2%. The probability distributions of the risky funds are: Expected Return 12% 5% Standard Deviation 33% 26% Stock fund (S) Bond fund (B) The correlation between the fund returns is .0308. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter13: Investing In Mutual Funds, Etfs, And Real Estate
Section: Chapter Questions
Problem 8FPE
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![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 4.2%. The probability distributions of the
risky funds are:
Expected return
Standard
Expected Return
12%
5%
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is .0308.
What is the expected return and standard deviation for the minimum-variance portfolio
of the two risky funds? (Do not round intermediate calculations. Round your answers
to 2 decimal places.)
deviation
Standard Deviation
33%
26%
11.21
28.63 %](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcc3a14d3-17e0-4f1a-b937-89b06afdc692%2Fc41efe4d-0421-423a-b457-2ea14bf2d8c5%2Fsznrv2_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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 4.2%. The probability distributions of the
risky funds are:
Expected return
Standard
Expected Return
12%
5%
Stock fund (S)
Bond fund (B)
The correlation between the fund returns is .0308.
What is the expected return and standard deviation for the minimum-variance portfolio
of the two risky funds? (Do not round intermediate calculations. Round your answers
to 2 decimal places.)
deviation
Standard Deviation
33%
26%
11.21
28.63 %
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