To find the fraction of wealth to invest in Stock fund that will result in the risky portfolio with minimum variance the following formula to determine the weight of Stock fund in risky portfolio should be used |
Where | ||
Stock fund | E[R(d)]= | 16.00% |
Bond fund | E[R(e)]= | 12.00% |
Stock fund | Stdev[R(d)]= | 35.00% |
Bond fund | Stdev[R(e)]= | 15.00% |
Var[R(d)]= | 0.12250 | |
Var[R(e)]= | 0.02250 | |
T bill | Rf= | 16.00% |
Correl | Corr(Re,Rd)= | 0.13 |
Covar | Cov(Re,Rd)= | 0.0068 |
Stock fund | Therefore W(*d) (answer a-1)= | 0.1193 |
Bond fund | W(*e)=(1-W(*d)) (answer a-1)= | 0.8807 |
Expected return of risky portfolio (answer a-2)= | 12.48% | |
Risky portfolio std dev (answer a-2)= | 14.36% |
Where | |||||
Var = std dev^2 | |||||
Covariance = Correlation* Std dev (r)*Std dev (d) | |||||
Expected return of the risky portfolio = E[R(d)]*W(*d)+E[R(e)]*W(*e) | |||||
Risky portfolio standard deviation =( w2A*σ2(RA)+w2B*σ2(RB)+2*(wA)*(wB)*Cor(RA,RB)*σ(RA)*σ(RB))^0.5 |
A pension fund manager is considering three mutual funds. The first is a stock fund, the...
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 rate of 8%. The probability distribution of the risky funds is as follows: Expected Return 24% 12 Standard Deviation 30% 19 Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.13. a-1. What are the investment proportions in the...
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 rate of 8%. The probability distribution of the risky funds is as follows: Expected Return 19% Standard Deviation 31% 23 Stock fund (S) Bond fund (B) 14 The correlation between the fund returns is 0.10. a-1. What are the investment proportions in the...
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 rate of 8%. The probability distribution of the risky funds is as follows: Expected Return 21% 12 Standard Deviation 288 18 Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.09. a-1. What are the investment proportions in the...
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 rate of 8%. The probability distribution of the risky funds is as follows: Expected Return 20% Standard Deviation 30% 15 Stock fund (5) Bond fund (B) 12 The correlation between the fund returns is 0.10. a-1. What are the investment proportions in the...
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 rate of 8%. The probability distribution of the risky funds is as follows: Expected Return 203 Standard Deviation 356 15 Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.09. ces a-1. What are the investment proportions in the...
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 rate of 8%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 21 % 36 % Bond fund (B) 13 22 The correlation between the fund returns is 0.13. a-1. What are the investment proportions...
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 rate of 8%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 24 % 30 % Bond fund (B) 12 19 The correlation between the fund returns is 0.13. a-1. What are the investment proportions...
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 rate of 7%. The probability distribution of the risky funds is as follows: Expected Return 16% 12 Standard Deviation 38% Stock fund (S) Bond fund (B) 21 The correlation between the fund returns is 0.12. Solve numerically for the proportions of each asset...
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 rate of 6%. The probability distribution of the risky funds is as follows: Expected Return 21% Standard Deviation 28% 18 Stock fund (S) Bond fund (B) 12 The correlation between the fund returns is 0.09. Solve numerically for the proportions of each asset...
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 rate of 8%. The
probability distribution of the risky funds is as follows:
Expected Standard Deviation Return Stock fund (S) Bond fund (B) 17% 30% 22 11 The correlation between the fund returns is 0.10 a-1. What are the investment proportions in the...