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 3.5%. The proability distributionsof the risky funds are:
*The correlation between the fund returns is .55.*
What are the expected return, standard deviation, and sharpe ratio for the minimum-variance portfoilo of the two risky funds, and what would be the weights of the stock and bond fund for an optimal portfoilo?
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