Question 5

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 Variance and Standard Deviation of the Minimum Variance Portfolio?
Standard Deviation of the Minimum Variance Portfolio:
Min = [wS2S2 + wB2B2 + 2wSwB Cov(rS, rB)]1/2

VAR = .0089 STDEV = .1021

VAR = .0094. STDEV = .0968

VAR = .0062 STDEV = .1223

VAR = .0049. STDEV = .06894