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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 rate of 5%. The probability distribution of the risky funds is as follows:

Expected Return Standard Deviation

Stock fund (S) 17% 30%

Bond fund (B) 11 22

The correlation between the fund returns is 0.10.

What is the Sharpe ratio of the best feasible CAL?

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