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 23% 14 Sharpe ratio Standard Deviation 29% 17 Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.12. 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 third is a money market fund that provides a safe return of 4%. The characteristics of the risky funds are as follows: Expected Return 23% 14 Sharpe ratio Standard Deviation 29% 17 Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.12. 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 4%. The characteristics of the risky funds are as follows:
Expected
Return
23%
14
Standard
Deviation
29%
17
Stock fund (S)
Bond fund (B)
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%2F11a6ed15-7910-46bc-a95f-6474a239a5de%2F0ebdae0c-3c4c-410b-a207-d0a6cb9c6ed5%2F7fn6go_processed.jpeg&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 4%. The characteristics of the risky funds are as follows:
Expected
Return
23%
14
Standard
Deviation
29%
17
Stock fund (S)
Bond fund (B)
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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