The following data apply to Problems 812.

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 sure rate of 5.5%. The probability distributions of the risky funds are:

	Expected Return	Standard Deviation
Stock Fund (S)	15%	32%
Bond Fund (B)	9	23

The correlation between the fund returns is 0.15.

12) If you were to use only the two risky funds and still require an expected return of 12%, what would be the investment proportions of your portfolio? Compare its standard deviation to that of the optimal portfolio in the previous problem. What do you conclude? (LO 6-4) Show ALL work!