Required information[The following information applies to the questions displayed below.]A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term governmentand corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probabilitydistributions of the risky funds are:Stock fund (5)Bond fund (B)The correlation between the fund returns is 0.15.ExpectedReturn15898Required:Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal riskyportfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.)Answer is complete but not entirely correct.15.55%84.45 X %9.93 X %25.52 %Portfolio invested in the stockPortfolio invested in the bondExpected returnStandard deviationStandardDeviation32%23%4

To find the proportions of each asset in the optimal risky portfolio and the expected return and…

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 5.5%. The probability distributions of the risky funds are: Expected Return Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.15. 158 98 Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Answer is complete but not entirely correct. 15.55 X % 84.45 X % 9.93 % 25.52 % Standard Deviation 32% 23%

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 5.5%. The probability distributions of the risky funds are: Expected Return Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.15. 158 98 Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Answer is complete but not entirely correct. 15.55 X % 84.45 X % 9.93 % 25.52 % Standard Deviation 32% 23%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

18. An insurance agent has claimed that the average age of policy-holders who insure through him is less than the average for all agents, which is 30-5 years. A random sample of 100 policy-holders who had insured through him gave the following age distribution : Age last birthday 16-20 21-25 26-30 31-35 36-40 No. of persons 12 22 20 30 16 : Calculate the arithmetic mean and standard deviation of this distribution and use these values to test his claim at the 5% level of significance. You are given that Z (1-645) = (0-95.
Please no written by hand solution Kate recently invested in real estate with the intention of selling the property one year from today. She has modeled the returns on that investment based on three economic scenarios. She believes that if the economy stays healthy, then her investment will generate a 30 percent return. However, if the economy softens, as predicted, the return will be 10 percent, while the return will be -25 percent if the economy slips into a recession. If the probabilities of the healthy, soft, and recessionary states are 0.6, 0.2, and 0.2, respectively, then what are the expected return and the standard deviation of the return on Kate❝s investment? Calculate the coefficient of variation for this investment. (Round expected return to 3 decimal places, e.g. 0.125 and round intermediate calculations and standard deviation to 5 decimal places, e.g. 0.07680.)
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, and the third is a T-bill money market fund that yields a rate of 8%. The mean and the standard deviation of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 20% 30% Bond fund (B) 12% 15% The correlation between the fund returns is 0.10. Your client’s degree of risk aversion is A = 3.5. Given the utility function: U = E(r) - 1/2 A Sigma^2 What proportion, y, of the total investment should be invested in the tangency portfolio so that your client can maximize his/her expected utility? What is the expected value and standard deviation of the rate of return on your client’s optimized portfolio?
Decorators Co. got a 15-year loan from NatWest Bank in 2016 for an amount of £22 million. The loan was taken at an annual interest rate of 12%. After 5 years in 2021, Decorators Co. had managed to pay back £9.5million. Currently owing on the loan is the principal balance plus interest of £800,000. In 2021, the probability that Decorators Co. defaults on the loan is 4.5%, in the same year, if there is a default, NatWest bank expects that it will be able to recover 75% of the loan. Given the information above, you are required to determine: Exposure at default (EAD) Value of Loss given default value (LGD) Expected loss (EL)
Probability Possible Rate of Return 0.25 -0.10 0.15 0.00 0.35 0.10 0.25 0.25 a. Under what conditions can the standard deviation be used to measure the relative risk of two investments? b. Under what conditions must the coefficient of variation (CoVar) be used to measure the relative risk of two investments?
Q.3 What is the difference between ordinary least square and maximum likelihood ( ML ) estimators ? Also discuss their properties ?
QUESTION :- An insurance company would like to offer theft insurance for renters. The policy would pay the full replacement value of any items that were stolen from the apartment. Some apartments have security alarms installed. Such systems detect a break-in and ring an alarm within the apartment. The insurance company estimates that the probability of a theft in a year is 0.05 if there is no security system and 0.01 if there is a security system (there cannot be more than one theft in any year). An apartment with a security system costs the renter an additional $50 per year. Assume that the dollar loss from a theft is $10,000 and that the insurance company is risk neutral and the renter would be willing to pay more than the expected loss to insure against the loss of theft. For a security system to be effective the renter must turn it on whenever he or she leaves the apartment. Suppose it costs the renter $10 per year in expended effort to turn on the alarm system. What is the…
Q. 2. Explain why there must be mistake in the following statement: "A quality control engineer claims that the probability that a large consignmen of glass bricks contians 0, 1, 2, 3, 4 or 5 defectives are 0-11%; 0-23, 0-37, 0-26, 0-009 and 0-05 respectively".
The reliability of an estimator is assessed in terms of its _____. Select one: a. mean b. ease of computation c. coefficient of variation d. variance
3. For the standardized normal distribution, the following probabilities is ? (1.26 < Z < 1.63) = a) P(Z = 1.63) – P(Z = 1.26) b) P(Z = 1.63) + P(Z = 1.26) %3D %3D c) 0.5 – P(z= 1.63) d) b & c.
Question: It is known that the mean diameters of rivets produced by two firms A and B are practically the same but the standard deviations may differ. For 22 rivets produced by firm A, the standard deviation is 2.9 mm. while for 16 rivets manufactured by firm B, the standard deviation is 3-8 mm. Compute the statistic would use to test whether the you products of firm A have the same variability as those of firm B and test its significance?
1 A car dealer has established that 40% of his potential customers prefer single cab cars while 60% prefer double cab cars. From a recent survey among his existing clients, he obtained additional information which indicates that 15% of clients who bought single cab cars prefer air conditioning while 65% of clients who bought double cars prefer air conditioning.Required:a) What is the probability that a client who bought a single cab does not prefer air conditioning? (5)b) What is the probability that a client prefers a double cab with air conditioning?