MGT 200 Lecture Notes - Lecture 4: Money Market Fund, Stock Fund, Bond Fund
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Suppose your expectations regarding the stock market are as follows: Use equations to compute the mean and standard deviation of the hpr on stocks. E(r) = 0. 3*. 4 + 0. 4*0. 07 + 0. 3*-0. 023 = 7. 9% Standard deviation = 0. 3(0. 4-. 079)2 + 0. 4(0. 07-. 079)2 + 0. 3(-0. 23-. 079)2 = 24. 41% The stock of business adventures sells for a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Required: (a) calculate the expected holding-period return and standard deviation of the holding-period return. 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. 0%. The probability distributions of the risky funds are: The correlation between the fund returns is . 0500. Wa = [. 2^2 (. 05*. 4*. 2)] / [. 4^2 + . 2^2 2*(. 05*. 4*. 2)] = 18. 75%
