A pension fund manager is considering three assets The first is a stock fund, the second is a long term government and corporate bond fund, and the third is a T bill yielding 0 04 The probability distribution of the risky funds is as follows Expected ret std dev Stock fund 0 19 0 31 Bond fund 0 06 0 11 The correlation between the fund returns is 0 18 An investor has a risk aversion of 8 In her optimal complete portfolio (including stocks, bonds, and risk free assets), what is the proportion of the risk free asset

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Question: A pension fund manager is considering three assets. The first is a stock fund, the second is a long-term government and corporate bond fund, and

A pension fund manager is considering three assets. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill yielding 0.04. The probability distribution of the risky funds is as follows:

	Expected ret.	std. dev.
Stock fund	0.19	0.31
Bond fund	0.06	0.11

The correlation between the fund returns is 0.18. An investor has a risk-aversion of 8. In her optimal complete portfolio (including stocks, bonds, and risk-free assets), what is the proportion of the risk-free asset?

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