If you were to use only the two risky funds, and still require an expected return of 14%, what must be the investment proportions of your portfolio? Compare its standard deviation to that of the optimized portfolio in problem 10. What do you conclude.
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you were to use only the two risky funds, and still require an expected return of 14%, what must be the investment proportions of your portfolio? Compare its standard deviation to that of the optimized portfolio in problem 10. What do you conclude
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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 5.5%. The probability distributions of the risky funds are:
Expected Return
Standard Deviation
Stock fund (S)
15%
32%
Bond fund (B)
9
23
The correlation between the fund returns is .15.
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