Question

Intro You have $10,000 to invest and are deciding between investing in an equity mutual fund and Treasury bills. The fund has an expected return of 9% and a standard deviation of returns of 20%. T-bills have a return of 4%. Part 1 La Attempt 3/5 for 8 pts. If you put 76% into the mutual fund, what is your expected return? 3+ decimals Submit Part 2 | Attempt 1/5 for 10 pts. What is the standard deviation of returns if you put 76% into the mutual fund? 3+ decimals Submit

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

A Mutual Fund Treasury bills Expected Return 9% 4% Standard deviation 20% 0% Amount to Invest $10,000.00 8 Part-1 % of fund invested (weight) Portfolio's Assets Mutual Fund T-bills 76% 24% Expected return 7.800% Part-2 Standard deviation of Portfolio in part-1 15.200% 16 17 18 19 Part-3 Acceptable Standared deviation 10% Weight of Mutual Fund Weight of T-bills 50.00% 50.00% Money invested in T-bills $5,000

Cell reference -

Expected Return Standard deviation 0.09 Mutual Fund Treasury bills 0.04 0 Amount to Invest 10000 Portfolio's Assets Mutual Fund T-bills % of fund invested (weight) 0.76 =1-09 Expected return =C9*C3+C10*C4 Part-2 15 Standard deviation of Portfolio in part-1 =C9*D3 16 17 18 19 Part-3 | Acceptable Standared deviation 0.1 Weight of Mutual Fund Weight of T-bills =C19/D3 =1-C21 Money invested in T-bills =C22*C6

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.