A pension fund manager is considering three mutual funds. The first is a stock f

Question

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 5.8%. The probability distributions of the risky funds are:

Suppose now that your portfolio must yield an expected return of 17% 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.)

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Worksheet j

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 5.8%. The probability distributions of the risky funds are:

Explanation / Answer

Return Deviation S 19% 48% B 9% 42% T.Bill 6% Stock Weighatge 81.00% Bond Weightage 16.00% T-bill Weightage 3% Portfolio Std. deviation 46.35%

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