A pension fund manager is considering three mutual funds. The first is a stock fund, the second
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Question:
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm bond fund, and the third is a money market fund that provides a safe return of The characteristics of the risky funds are as follows:
Expected Return Standard Deviation
Stock fund S
Bond fund B
The correlation between the fund returns is
You require that your portfolio yield an expected return of and that it be efficient, that is on the steepest feasible CAL.
a What is the standard deviation of your portfolio? Round your answer to decimal places.
b What is the proportion invested in the money market fund and each of the two risky funds? Round your answers to decimal places.
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