A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the thirdis a money market fund that provides a safe return of 5%. The characteristics of the risky funds are as follows:Stock fund (5)Bond fund (8)Standard deviationExpected Return20%11The correlation between the fund returns is 0.09.You require that your portfolio yield an expected return of 12%, and that it be efficient, that is, on the steepest feasible CAL.a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.)Money market fundStocksBondsStandard Deviation35%15%b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimalplaces.)ProportionInvestedI

Risk and return are essential financial principles. The term “risk” refers to the uncertainty and…

a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.). Standard deviation % 4 b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.)

a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.). Standard deviation % 4 b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 5P

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