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A pension fund manager is considering three mutual funds,

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?"18. A pension fund manager is considering three mutual funds, the stock fund, the";"bond fund and a T-bill money market fund that yields a sure rate of 5.5%. The distribution of the risky funds are: (HW4, use the ?secret formula?)";"" "E(r)" "Std dev";"Stock fund" "15%" "32%";"Bond fund" "9%" "23%";"The correlation of the stock and the bond fund is 0.15. What?s the expected";"return and risk of the tangency portfolio? A) 12.88%, 23.34%";"B) 12.16%, 18.41%";"C) 20%, 30%";"D) 30%, 35%";"19. Suppose that the optimal risky portfolio (tangency portfolio) has an expected";"return of 13.25% and standard deviation of 24.57%. How can you construct an efficient portfolio for your client Mr. Smith, with an expected return of 12%? The T-Bill gives a guaranteed return of 5.5% (HW4)";"A) invest 83.87% in the optimal risky portfolio and the rest in the risk free portfolio";"B) invest 16.13% in the optimal risky portfolio and the rest in the risk free portfolio";"C) invest 50% in the stock fund and 50% in the bond fund";"D) invest 57.8% in the stock fund and the rest in the risk free portfolio"

 

Paper#27795 | Written in 18-Jul-2015

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