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Help Save & Exit Submit Check my work 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 4.3%. The probability distributions of the risky funds are: Stock fund (S) Bond fund (B) Stock fund (S) Expected Return 1 Standard Deviation 3 :48 The correlation between the fund returns is 0.0630. What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Sharpe ratio < Prev 17 of 22 1 Next >

Answer 1

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VC AMORT SINKING JORDAN -Microsoft Excel (Product Activation Failed) OPTIMAL RISKY POR Page Layout File Home Insert Formulas Data Review View Add-Ins E AutoSum - Cut А A Wrap Text Calibri 11 General Copy Fill в IU- Merge & Center Paste 000 Conditional Format Cell Insert Delete Format Sort & Find & % Format Painter Clear Filter Select Formatting as Table Styles Number Clipboard Font Alignment Styles Cells Editing fx АН18 W Y Z AA АВ AC AD АЕ AF AG АН AI AJ АК 1 E(rS) = 2 13 ophmad risky Port folio E(rB) = 3 6 rf = 4 4.3 a (S) 5 34 E(A)- -E(A)-f Couce,s) o (B) 6 27 0.063 7 r = EI2s)- E)-ne 8 cov Ce,s = ৫ . & 9 10 EAs)-Afr E)-faS) cov(A,B) 57.83 11 12 13 (АН2-АН4)*(АН6^2) - (АНЗ-АН4) *(АН11) (АН2-АН4)* (АН6^2) + (АНЗ-АН4)*(АН5^2) - (АН2-АН4+АНЗ-АН4)*(АН11) Ws = 6243.98 14 15 7706.03 16 0.8103 17 Ws = 81.03% WEIGHT OF STOCK FUND 0.1897 18 WB = 18.97% WEIGHT OF BOND FUND 19 Sheet2VCJORDAN INSURANCE Sheet3 Sheet4 Sheet1 Sheet5 Sheet6 I Sheet8 MIN VAR PORT BEST CAL BINOMIAL 2 TIME SINKING AMORTIZA greta 130 % erences WA 07:28 ENG 05-11-2019

OPTIMAL RISK VC AMORT SINKING JORDAN - Microsoft Excel (Product Activation Failed) Page Layout File Home Insert Formulas Data Review View Add-Ins E AutoSum - Cut A A Wrap Text Calibri 11 General Copy Fill BI U Merge & Center Insert Delete Format Paste Conditional Format Cell Sort & Find & Filter Select % Format Painter Clear Formatting as Table Styles Number Styles Clipboard Font Alignment Cells Editing fox AF21 W X Y Z AA AB AC AD AE AF AG AH AI AJ AK 21 return on portfolio 22 (ws CEas ECp) 23 24 E(rp)= (AA17*AH2) (AA18*AH3) 25 11.6719 % E(rp)= 11.67 % 26 EXPECTED RETURN 27 variance of portfolio 28 29 = 30 31 +2.WW2 CovC8,s) 32 33 o2 p= 802.9854 % (AA17^2)*(AH5^2) + (AA18^2)*(AH6^2) + 2*(AA17)*(AA18)*(AH11) 34 Standard deviation of portfolio 35 [sqrt(variance)] ор %3 36 28.3370 op 37 28.34% STANDARD DEVIATION op 38 (E(rp)-rf) ap (11.6719% - 4.3%)/28.3370% = 39 ANSWER REWARD TO VOLATILITY RATIO = SHARPE RATIO = 0.2602 Sheet2 VCJORDAN SINKING AMORTIZA INSURANCE Sheet5 I 130% ( ) Sheet1 Sheet3 Sheet6 Sheet8 MIN VAR PORT BINOMIAL 2 TIME Sheet4 4 BEST CAL greta erences WA 07:28 ENG 05-11-2019