Problem 7-9 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 7%. The probability distribution of the risky funds is as follows: Expected Return 23% 15 Standard Deviation Stock fund (S) Bond fund (8) 28% 17 The correlation between the fund returns is 0.12 You require that your portfolio yield an expected return of 13%, 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.) 5 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.) Proportion Invested 96 Tbil fund Stocks Bonds % Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows Stock A B Expected Return 14% 2e Correlation-1 Standard Deviation 4% 13 Suppose that it is possible to borrow at the risk-free rate. If What must be the value of the risk-free rate? (Hint Think about constructing a risk-free portfolio from stocks A and B) (Do not round intermediate calculations. Round your answer to 3 decimal places.) Risk-free rate