Problem $7-4$

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a

long$-$term bond fund, and the third is a money market fund that provides a safe return of $8\%.$

The characteristics of the risky funds are as follows:

The correlation between the fund returns is $0\mathrm{.}14.$

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

a$-2.$ What are the expected value and standard deviation of the minimum$-$variance portfolio rate of

return? $($Do not round intermediate calculations. Enter your answers as decimals rounded to $4$

places.$)$