Which of the following statements about the minimum variance portfolio of all risky securities are valid? (Assume short sales are allowed.) Explain.

a. Its variance must be lower than those of all other securities or portfolios.

b. Its expected return can be lower than the risk-free rate.

c. It may be the optimal risky portfolio.

d. It must include all individual securities.

The following data apply to Problems 4 through 10 : 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 8%. The probability distribution of the risky funds is as follows:

The correlation between the fund returns is .10.

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Expected Return Standard Deviation Stock fund (S) 20% 30% Bond fund (B) 12 15