Question 4

5 Points

	B	C	D
3	A pension fund manager is considering 3 mutual funds.
4	The first is a stock fund, the second is a corporate bond fund,
5	and the fhird is a Treasury Bill fund.
6	The rate of return on the T-Bill fund is	5.00%
7	You have the following data on the two risky funds:
8		Expected	Standard
9	Fund	Return	Deviation
10	Bond	8.0%	0.2400
11	Stock	28.0%	0.3800
12	Correlation Coefficient (rho)		-.8000

What is the Expected Return on the Optimal Risky Portfolio?
E(rp) =(Weight of bonds * Erb) + (Weight of Stocks * Ers)

Expected Portfolio Return = 17.45%

Expected Portfolio Return = 14.65%

Expected Portfolio Return = 16.45%

Expected Portfolio Return = 15.46%