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 thir s a money market fund that provides a safe return of 5%. The characteristics of the risky funds are as follows: Expected Return 17% 13 Standard Deviation Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.12. 38% 18 What is the Sharpe ratio of the best feasible CAL? Note: Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.
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 thir s a money market fund that provides a safe return of 5%. The characteristics of the risky funds are as follows: Expected Return 17% 13 Standard Deviation Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.12. 38% 18 What is the Sharpe ratio of the best feasible CAL? Note: Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter13: Investing In Mutual Funds, Etfs, And Real Estate
Section: Chapter Questions
Problem 2FPE
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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 bond fund, and the third
is a money market fund that provides a safe return of 5%. The characteristics of the risky funds are as follows:
Stock fund (S)
Bond fund (B)
Expected
Return
17%
13
Standard
Deviation
38%
18
The correlation between the fund returns is 0.12.
Sharpe ratio
What is the Sharpe ratio of the best feasible CAL?
Note: Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F90eb1610-f188-4898-9074-e74ef7815b36%2Fa5110553-15ab-4299-93b6-606e61057f3b%2Fhhbknon_processed.png&w=3840&q=75)
Transcribed Image Text: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 5%. The characteristics of the risky funds are as follows:
Stock fund (S)
Bond fund (B)
Expected
Return
17%
13
Standard
Deviation
38%
18
The correlation between the fund returns is 0.12.
Sharpe ratio
What is the Sharpe ratio of the best feasible CAL?
Note: Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.
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