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 rate of 5.5%. The stock fund and bond fund have expected returns 15% and 9%, and SD 32% and 23% The correlation between them is 0.15. 1. Calculate risky portfolio (with stock and bond fund) return and standard deviation under different weights (0.1 increment).
Q: turns earned over a given time period are called realized returns. Historical data on realized…
A: Standard deviation is the measure of risk and can be measured as the deviation from the mean return…
Q: Adam current salary is £106000 annually. He expect that his salary will growth 6% every year until…
A: We can determine his salary when he retires using the FV formula as below:Out of the salary at…
Q: Four years ago, XZY deposited $2,920 in an account that has earned and will earn 8.70 percent per…
A: Under the compounded interest rate, the base amount on which the interest is earned increases every…
Q: A remotely located air sampling station can be powered by solar cells or by running an above ground…
A: The equilibrium cost of two projects refers to the point at which the costs associated with both…
Q: ave a convertible bond with a par value of 100,000 with a 10% coupon. It can be converted into…
A: Some bonds have conversion features and can be converted into stocks on the expiration of the bond…
Q: If investors are to earn a 3.4% real interest rate, what nominal interest rate must they earn if the…
A: Real Interest rate = rr = 3.4%Formula :Nominal Interest rate = ((1 + Real Interest rate) * (1 +…
Q: ast year Kruse Corp had $380,000 of assets (which is equal to its total invested capital), $403,000…
A: ROE is the return on equity and is one important measure of profitability of company and very…
Q: A two-year amortizing bond has a coupon rate of 4% and pays its coupons semi- annually. Coupon…
A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: The following three Fls dominate a local market and their total assets are given below. Institution…
A: A merger is a strategic business combination in which two or more companies merge their operations…
Q: A stock has had returns of 21 percent, 13 percent, 8 percent, -11 percent, -3 percent, and 17…
A: The return on stock refers to the profit that the stock provides to the investor for their…
Q: Question A A loan is amortized over five years with monthly payments at a nominal interest rate…
A: The borrowings are the liability that is used in financing the requirements of the funds. The…
Q: In the Management Report contained in the audited annual report, managemerit acknowledges its…
A: Audited Annual Report is a comprehensive financial document that an organization produces on a…
Q: NPV and maximum return DC Fragrance considers purchasing a new fragrance mixing machine for a…
A: Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or…
Q: Mullet Technologies is considering whether or not to refund a $75 million, 13% coupon, 30-year bond…
A: Here, Current Bond InformationPar Value of Bond $75,000,000.00Coupon Rate13%Maturity in…
Q: The Webex Corporation is trying to choose between the following two mutually exclusive design…
A: Profitability Index or PI is the ratio of present value of operating cash inflows to the present…
Q: its 150,000 in a bank, with the bank agreeing to pay 6% annual effective for three years. The client…
A: In this question, a client deposits 150,000 in a bank, with the bank agreeing to pay 6% annual…
Q: Oppenheimer Bank is offering a 30-year mortgage with an APR of 4.95% based on monthly compounding.…
A: Compounding frequency is a term that relates to the number of times that interest on the deposited…
Q: urrent Attempt in Progress Choose the best definition of risk transfer. O Risk transfer is the…
A: In finance risk is an inherent element in any kind of investments and in any kind of financial…
Q: Assume that the credit risk on a 5 year6 percent annual coupon corporate bond is represented by a…
A: The credit spread is the difference between the yield on a corporate bond and the risk-free…
Q: There are three currencies: alpha (a), beta (b) and gamma (c). The three exchange rates are as…
A: Exchange rates are the values at which one currency can be exchanged for another. They determine the…
Q: Your firm is contemplating the purchase of a new $655,000 computer-based order entry system. The…
A: IRR stands for "Internal Rate of Return," and it is a financial metric used to evaluate the…
Q: Directions: Compute the total returns, the average of returns, and the standard deviation of the…
A: Risk-return refers to the fundamental relationship between the potential gains and losses associated…
Q: You deposit 1,500 to an account that earns a nominal 6% convertible monthly for one year and a…
A: Present value is an estimate of the present value of future cash values that may be received at a…
Q: Suppose a company has the chance to make an investment that will result in a profit of 10 billion if…
A: Value of Bond in case of unsuccess is $0Value of Bond in case of success is $1,000Probability of…
Q: After performing a horizontal analysis, we can say that the company's current…
A: Horizon analysis is a financial and investment analysis technique used to evaluate the potential…
Q: Account A pays 8% compounded annually, account B pays 10% compounded annually, and account C pays…
A: Present value of the annuity refers to the current value of the future cash flows or the discounted…
Q: You sold short 300 shares of common stock at $55 per share. The initial margin is 60%. At what stock…
A: You are taking the short position, that means you are selling the shares. You will get a margin call…
Q: You invested $100 in a stock five years ago. Over the last five years, annual returns have been 15%,…
A: The concept of the arithmetic average annual rate of return is a way to measure the average yearly…
Q: Firm A generates more cash flow while taking less risk than Firm B. The stock price of Firm A should…
A: Stock also called shares or equity is ownership in a company. When you own stock in a company you…
Q: (Related to Checkpoint 8.3) (Systematic risk and expected rates of return) The following table,,…
A: Beta is a measure of volatility of a stock. It shows the expected move in a stock price relative the…
Q: An investor owns an ETF (Exchange Traded Fund) tracking the ASX 200 index as part of his portfolio,…
A: An Exchange-Traded Fund (ETF) is a type of investment fund that trades on stock exchanges,…
Q: 1. During the currency crisis of September 1992, the Bank of England borrowed DM 33 billion from the…
A: A currency's value with respect to other currencies is established by its exchange rate, which is…
Q: Air Asia has 1.4 million shares of stock outstanding. The stock currently sells for $20 per share.…
A: Variables in the question:No. of shares of stock outstanding=1.4 million =1400,000Current price per…
Q: Bond value and time—Constant required returns Pecos Manufacturing has just issued a 15-year,…
A: Bonds refer to the instruments issued by companies for raising debt capital from non-traditional…
Q: Ubu Bank has the following market value balance sheet (in millions, all interests at annual rates…
A: Duration of3.5% corporate bond = 2 years3.% zero coupon bond = 2 yearsTotal assets = $1125Total…
Q: 1.Consider a security with a face value of $100,000 to be repaid at maturity. The maturity of the…
A: Please note that under the guidelines only 1 question can be solved. Since multiple questions are…
Q: What will be his portfolio weight for Share D
A: First, we need to determine the amount invested in Share D. This can be determined with the formula…
Q: Stock price is SO=$50.S0=$50. Only one (discrete) dividend $5$5 is going to be paid in 9 months.…
A: A European put option is a financial contract that grants the holder the right, but not the…
Q: A client has the following obligations: $20,000 maturing in 2 years with interest at 5%…
A: To analyze the client's obligations and determine whether it's possible to replace the debts…
Q: Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25…
A: An annuity is a financial product or contract that provides a series of regular payments to an…
Q: How to complete the personal balance and calculate the net worth?
A: Calculation of Net worth and Personal balance.
Q: Bond X has 5 years maturity with 8 percent coupon rate, Bond Y also has 5 years maturity but the…
A: When market interest rates rise, bond prices fall. This is a fundamental concept in fixed income.…
Q: Suppose the risk-free rate is 8%. The expected return on the market is 16%. If a particular stock…
A: Variables in the question:Rf=8%Rm=16%Beta=0.7
Q: D3) Finance The current SOFRs for 3-month, 6-month and 9-month are 10.96%, 11.25% and 11.45%,…
A: To annualize the swap rate for the 9-month interest rate swap, you can use the formula for…
Q: Jedson Pinto is a trader for Articuno Capital. He decided to buy 100 shares of Tesla at $ 150 per…
A: "Levered" refers to the use of borrowed money (or debt) to finance an investment, with the intention…
Q: 1.Consider the following repricing buckets: Repricing bucket Assets Liabilities 1 day $150,000…
A: As per our guidelines we are supposed to answer only one question (if there are multiple questions…
Q: As of Dec 01, 2020, Pfizer announced that the Federal Drug Administration has approved its new…
A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…
Q: A firm that purchases electricity from the local utility for $350,000 per year is considering…
A: Net present is the one of the most important capital budgeting method used and is based on the time…
Q: Suppose you secure a loan in the amount of $5,000 for the contract period of 24 months. If the…
A: Monthly repayment on a loan is the amount a borrower is required to pay each month to the lender,…
Q: Explain how Social Security benefits are calculated and how much you need to work each quarter to be…
A: Social Security benefits in the United States are calculated based on your lifetime earnings and the…
ff2
Step by step
Solved in 3 steps with 3 images
- 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 rate of 5.9%. The probability distribution of the risky funds is as follows: Stock fund (5) Bond fund (8) Expected Return 20% The correlation between the fund returns is 0.19 Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places. Omit the "%" sign in your response.) Portfollo invested in the stock Portfolio invested in the bond Expected retur Standard deviation % Standard Deviation 49% 41 %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 4.2%. The probability distributions of the risky funds are: Expected return Standard Expected Return 12% 5% Stock fund (S) Bond fund (B) The correlation between the fund returns is .0308. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) deviation Standard Deviation 33% 26% 11.21 28.63 %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 4.5%. The probability distributions of the risky funds are: Expected Return Stock fund (S) 15% Bond fund (B) 9% The correlation between the fund returns is 0.15. Required: What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) S 40% 31%
- 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: Stock fund (S) Bond fund (8) The correlation between the fund returns is 0.10. Expected Return 16% 10% Expected return Standard deviation. Required: What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) 1% % Standard Deviation 32% 23%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 third is a money market fund that provides a safe return of 7%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.10. You require that your portfolio yield an expected return of 16%, 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.) Standard deviation Expected Return Standard Deviation 198 31% 23 14 Money market fund Stocks Bonds 19.33 % 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.) Proportion InvestedA 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 rate of 6%. The probability distribution of the risky funds is as follows: E(r) st. dev. stock fund .24 .33 bond fund .14 .22 The correlation between the fund returns is 0.14. You require that your portfolio yield an expected return of 16%, and that it be efficient, on the best feasible CAL. a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.) b. What is the proportion invested in the T-bill fund and each of the two risky funds? (Round your answers to 2 decimal places.)
- A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a song-serm government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5%. The probability distributions of the risky funds are: Standard Deviation Expected Return 17% 24% 14% 10% Stock Fund (S) Bond Fund (B) The correlation between the fund returns is -0.2 ) Calculate the following variables: Risk Premium of stock Fund Risk Premium of Bond Fund Variance of Stock Fund Variance of Bond Fund Covariance between Stock Fund and Bond Fund Write down the formulas you used to complete the table above a b. Tabulate the investment opportunities set of the two risky funds. Use investment proportions for the stock fund of 0% to 100% in increments of 10%. From these options identify the portfolios closest to the minimum variance and optimal portfolios (do not use formulas)? Explain how to identify them. E(R₂) W₁ 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%…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 third is a money market fund that provides a safe return of 4%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.09. You require that your portfolio yield an expected return of 14%, and that it be efficient, that is, on the steepest feasible CAL. 17% 14 35% 18. Required: a. What is the standard deviation of your portfolio? b. What is the proportion invested in the money market fund and each of the two risky funds?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: Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.25. Expected Return 17% 11% Required: What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) X Answer is complete but not entirely correct. Expected return Standard deviation 14.67 X % 23.83 % Standard Deviation 38% 29%
- A pension fund manager is considering three mutual funds for investment. The first one is a stock fund, the second is a bond fund and the third is a money market fund. The money market fund yields a risk-free return of 4%. The inputs for the risky funds are given in the following table. Fund Expected Return Standard Deviation Stock fund 10% 15% Bond fund 8% 12.5% The correlation coefficient between the stock and the bond funds is 0.20. What is the expected return and the variance for a portfolio that invests 60% in the stock fund and 40% in the money market fund? [Hint: Note that the correlation coefficient between the portfolio and the money market fund is zero.]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: Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.25. Expected Return 17% 11% Expected return Standard deviation Required: What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) % Standard Deviation 32% 23%A pension fund manager is considering three mutual funds for investment. The first one is a stock fund, the second is a bond fund and the third is a money market fund. The money market fund yields a risk-free return of 4%. The inputs for the risky funds are given in the following table. Fund Expected Return Standard Deviation Stock fund 10% 15% Bond fund 8% 12.5% The correlation coefficient between the stock and the bond funds is 0.20. What is the expected return and the variance for a portfolio that invests 60% in the stock fund and 40% in the bond fund?