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statuscvo [17]
3 years ago
11

A fund manager is considering three mutual funds. The 1st is a stock fund, the 2nd is a long-term government and corporate bond

fund (investment grade), and the third is a T-bill money market fund that yields a sure rate of 3.00%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 12.00% 41.00% Bond fund (B) 5.00% 30.00% The correlation between the fund returns is 0.0667. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds
Business
1 answer:
Vinil7 [7]3 years ago
8 0

Answer:

Expected return is: 7.37% and the Standard deviation is: 24.96%

Explanation:

Correlation between fund S&B=0,0667

Standard Deviation of Fund S=41%

Standard Deviation of Fund(B)=30%

E(R) of Stock Fund S=12%

E(R) of Stock Fund B=5%

Covariance between the funds = Standard Deviation of Fund(B) × Standard Deviation of Fund S × correlation between these funds

Cov = 0.41 × 0.30 × 0.0667 = 0.008204

Now minimum variance portfolio is found by applying:

W min(S)=(SDB)^2-Cov(B,S) / ((SDS)^2+(SDB)^2-2Cov(B,S)

W min(S) = 0.338431

W min(B) = 1-0.338431=0.661569

1) E(r)min= 0.338431 × 12% + 0.661569 × 5% = 7.37%

2) Standard Deviation:

SD Min = (Ws^2XSDs^2+Wb^2XSDb^2+2XWsWb*Cov(s,B)^1/2

SDmin=(0.338431^2 × 0.41^2 + 0.661569^2 ×   0.3^2   + 2 × 0.338431 × 0.661569 × 0.008204)^1/2

SDmin=24.96%

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Answer:

still be liable for Hala's contract.

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6 0
3 years ago
Presented here are liability items for Skysong, Inc. at December 31, 2017. Accounts payable $298,300 FICA taxes payable $14,820
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Answer:

Explanation:

The preparation of the liabilities section of Skysong's balance sheet is shown  below:

                                          Skysong, Inc.

                                    Partial Balance Sheet

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Liabilities

Current Liabilities

Accounts payable                         $298,300

FICA taxes payable                      $14,820

Notes payable (due May 1, 2018) $38,000

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Income taxes payable                    $6,650

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Bonds payable (due 2021)             $1,710,000

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Discount on bonds payable           $77,900

Total Non -Current Liabilities                                 $1,939,900

Total liabilities                                                          $2832,900

7 0
3 years ago
Equipment costing $130,000 is expected to have a residual value of $10,000 at the end of its six-year useful life. The equipment
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Answer:

a. Straight-Line method:

Year depreciation = (Cost - Residual value) / useful life

= (130,000 - 10,000) / 6

= $20,000

2019 = $20,000                                      2020 = $20,000

b. Double declining.

= Twice the rate of straight-line.

= 1 / 6 * 2

= 33%

2019                                                            2020

= 130,000 * 33%                                        = (130,000 - 42,900) * 33%

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c. Units of Production:

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= (130,000 - 10,000) / 1,000,000

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2019                                                              2020

= 180,000 * 0.12                                           = 140,000 * 0.12

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Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $344,000 and credit sa
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Answer:

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