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A pension fund manager is considering three mutual funds. The first is a stock fund,...

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Finance

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 4.6%. The probability distributions of the risky funds are:

Stock fund (S) : Expected Return 16% Standard Deviation: 36%

Bond fund (B: Expected Return 7% Standard Deviation : 30%

The correlation between the fund returns is 0.0800. Suppose now that your portfolio must yield an expected return of 14% and be efficient, that is, on the best feasible CAL.

a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b-1. What is the Proportion Invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b-2. What is the Proportion Invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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