a.) 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 rate of 5%. The probability distribution of the risky funds is as follows:

The correlation between the fund returns is 0.12.

You require that your portfolio yield an expected return of 12%, and that it be efficient, on the best feasible CAL.

a.	What is the standard deviation of your portfolio? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Standard deviation

%

b.	What is the proportion invested in the T-bill fund and each of the two risky funds? (Round your answers to 2 decimal places.Omit the "%" sign in your response.)

Proportion Invested

T-bill fund

%

Stocks

%

Bonds

%

b.)

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 rate of 8%. The probability distribution of the risky funds is as follows:

	Expected Return	Standard Deviation
Stock fund (S)	17%	38%
Bond fund (B)	13	18
The correlation between the fund returns is 0.12.

a-1.	What are the investment proportions in the minimum-variance portfolio of the two risky funds. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.

Portfolio invested in the stock
Portfolio invested in the bond

What is the expected value and standard deviation of its rate of return? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

	Rate of Return
Expected return
Standard deviation