Financial Risk Manager Part 1

Financial Risk Manager Part 1

Get started today

Ultimate access to all questions.


Given that Prudent Fund is currently underperforming and manages USD 50 million in assets, the institutional sales team has proposed merging it with the Aggressive Fund, which manages USD 200 million. Prudent Fund's returns are normally distributed with a mean of 3% and a standard deviation of 7%, whereas Aggressive Fund's returns are also normally distributed but with a mean of 7% and a standard deviation of 15%. Assuming that the returns of both funds are independent, what is the probability that the returns of the merged fund will exceed 26%?