Problem 5. i. A pension fund manager is considering three mutual funds. The first is a stock fund (S), the second is a long-term government and corporate fund (B), and the third is a T-bill money market fund that yields a rate of 7%. The correlation between the fund returns is 0.2. The probability distribution of the risky funds is as follows: Stock fund (S) Bond fund (B) Expected Return Standard Deviation 15% 25% 10% 15% a. What is the reward-to-volatility ratio of the best feasible CAL? b. You require that your portfolio yield an expected return of 13%, and that it be efficient, on the best feasible CAL. What is the standard deviation of your portfolio? c. Now you use only the two risky funds. Comparing to the standard deviation in question b, how much additional standard deviation would your portfolio have if you wanted to maintain your portfolio's expected return at 13%? Problem 5. i. A pension fund manager is considering three mutual funds. The first is a stock fund (S), the second is a long-term government and corporate fund (B), and the third is a T-bill money market fund that yields a rate of 7%. The correlation between the fund returns is 0.2. The probability distribution of the risky funds is as follows: Stock fund (S) Bond fund (B) Expected Return Standard Deviation 15% 25% 10% 15% a. What is the reward-to-volatility ratio of the best feasible CAL? b. You require that your portfolio yield an expected return of 13%, and that it be efficient, on the best feasible CAL. What is the standard deviation of your portfolio? c. Now you use only the two risky funds. Comparing to the standard deviation in question b, how much additional standard deviation would your portfolio have if you wanted to maintain your portfolio's expected return at 13%