Business, 13.10.2021 02:30 kolbehoneyman

A pension fund manager is considering three funds. The first is a stock fund, the second is a bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.0%. The probability distributions of the risky funds are: Expected Return Standard Deviation
Stock funds (S) 16% 20%
Bond funds (B) 8% 10%
The correlation coefficient between the fund returns is 0.15.
a. You invest 50% in the stock fund and 50% in the bond fund. What is your expected return and standard deviation?
b. Use the formula from the Formula Sheet on Canvas (also available below) to compute the optimal risky portfolio (ORP) weights. What is the Sharpe ratio of the best CAL? You manage $1000 for your client and your client wants an expected return of 10%. How much money do you invest in each of the three funds?

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A pension fund manager is considering three funds. The first is a stock fund, the second is a bond f...

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