Scribd
Upload
6K views2 pages

Solution Provided by Assignment Helper Zone Tutor

Assignment Helper Zone provides original written assignment papers for students in proper time with better quality. Need someone to do all your assignments for you? Assignment Helper Zone serves you We assist you in doing your projects , assignments , research, case studies, homework better by guiding form start to end. We provide timely help at affordable charges with detailed answers to your assignments, homework, research papers.

Uploaded by

www.assignmenthelperzone.com
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
6K views2 pages

Solution Provided by Assignment Helper Zone Tutor

Assignment Helper Zone provides original written assignment papers for students in proper time with better quality. Need someone to do all your assignments for you? Assignment Helper Zone serves you We assist you in doing your projects , assignments , research, case studies, homework better by guiding form start to end. We provide timely help at affordable charges with detailed answers to your assignments, homework, research papers.

Uploaded by

www.assignmenthelperzone.com
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 2

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 Tbill money market fund that yields a sure rate of 5.5%. The probability distributions of
the risky funds are:
Expected Return

Standard Deviation

Stock Funds (S)

15%

32%

Bond Fund (B)

23

The Correlation between the fund return is 15.


8. Tabulated and draw the investment opportunity set of the two risky funds. Use
investment proportions for the stock fund of 0to 100% in increments of 20%. What
expected return and standard deviation does your graphs show for the minimum
Variance portfolio?
Answer:
Expected Returns:
E(Rp) = Ewi E(Ri)
E(Rp) = 0.10*0.150+0.2*0.900
0.015+0.18 = 0.195 = 19.5%
Standard Deviation:
S.D = square of[ (0.1)*(0.32)+(0.2)*(0.23)]+ 2(0.1)(0.2)(0.15)(0.32)(0.23)
= 0.1*0.102+0.04*0.052+2(0.00022)
= .00344= squared of 0.059= 5.9%

Efficient Frontier (CAL)

20.0%
15.0%
10.0%

Efficient Frontier
(CAL)

5.0%
0.0%
0.0%

Proportion
in "Your"
Fund (w)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
120.0%

5.0%

10.0%

Proportion
in other
asset (1-w)
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%

E(rp)
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%

15.0%

SD(rp)
23.0%
21.2%
19.5%
17.9%
16.6%
15.5%
14.7%
14.3%
14.3%
14.6%
15.4%
16.3%
17.1%

20.0%

25.0%

You might also like