Type 2 Section 2 (show your work in section 2 to get credit) 31. 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: Stock fund (S) Bond fund (8) Expected Return 15% Standard Deviatiorn 32% 23 The correlation between the fund returns is 0.15 (6 points) Assume you decide to include T-bill into your complete portfolio. The optimal risky portfolio (the combination of stock and bond fund that gives investor the best risk-return trade- off when combining with T-bill) has the following structure: 70.75% in stock and 29.25% in bond. Suppose now that your complete portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL What is the standard deviation of your portfolio? What is the proportion invested in the T-bill fund and each of the two risky funds