Business, 20.03.2020 06:53 historyfanboy101

You currently own shares in Buckeye Mutual Fund (BMF). Your broker calls and recommends buying shares in a small-capitalization fund managed by Wolverine Investment Group (WIG). Your broker says that this fund will provide significant diversification benefits for your existing holdings. She gives you the following statistics based on the performance of the two funds over the last year.

Portfolio E(return) Std. Dev.
Buckeye Mutual fund 20% 14%
Wolverine investment Grp. 12% 11%

Assume you can earn an average annual yield of 8% on a risk-free security. Which of these funds would be the optimal fund to combine with the risk-free security?

a. Buckeye
b. Wolverine
c. Neither Buckeye nor Wolverine
d. Both are equally good
e. There is not enough information to answer this question

Answers: 3

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You currently own shares in Buckeye Mutual Fund (BMF). Your broker calls and recommends buying share...

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