What is the proportion invested in the stock fund

Assignment Help Financial Management

Reference no: EM131839881

There are three mutual funds-a stock fund, a long-term bond fund, and a T-bill money market fund that yields a risk-free rate of 3.2% per year.

E(R stock)=11.45%

E(R bond)=7.08%

Standerd deviation (stock)= 16.71%

Standerd deviation (bond)= 16.71%

correlation coefficient for stock and bond funds=0.42%

rf=3.2%

1) Suppose your portfolio can only include T-bill and stock fund, expected return of the portfolio is 10%, what is the proportion invested in the stock fund? Sharpe ratio of your portfolio?

2) You can only use stock and bond to build a portfolio that has an expected return of 10%. What is the proportion invested in the bond fund? What is the Sharpe ratio of your portfolio? Tabulate and draw the investment opportunity set of the two risky funds. Use investment proportions for the stock fund of 0% to 100% in increments of 10%. What expected return and standard deviation does your graph show for the minimum-variance portfolio?

3) You can use all the 3 funds to build a portfolio. Expected return of the portfolio is also 10%. What is the proportion invested in the each of the 3 funds?

Reference no: EM131839881

Questions Cloud

Define benefits of developing a RAM for a project : Develop an argument for scope reporting mechanisms. At a minimum, what types of reports do you consider necessary for document control of a project? Why?

Define the efficient frontier : Profile Model. Assume the project profile model shown in Figure. Define the efficient frontier. The dotted lines represent the minimum return and the maximum.

Would mortgage payment be considered annuity : Would a mortgage payment be considered a annuity? What the main challenge Swiss insurance companies face today?

Who are Rolls principal project management stakeholders : Although the name Rolls-Royce is inextricably linked with its ultra-luxurious automobiles, the modern RollsRoyce operates in an entirely different competitive.

What is the proportion invested in the stock fund : what is the proportion invested in the stock fund? Sharpe ratio of your portfolio?

Define efforts of an impressive collection : As a result of the combined efforts of an impressive collection of computer science geniuses headquartered at Xerox's Palo Alto Research Center (PARC).

What is the effective interest rate in the first two years : What is the effective interest rate in the first two years? What is the effective interest rate after the second year?

What is the amount of the firm net fixed assets : What is the amount of the firm’s net fixed assets?

What is its enterprise value : Chevelle company has sales of $39,500, cost of $18,400, What’s its Enterprise Value (EV)?

User Account

All Pages