1.

A pension fund manager is considering three assets. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill yielding 0.05. The probability distribution of the risky funds is as follows:

	Expected ret.	std. dev.
Stock fund	0.19	0.25
Bond fund	0.09	0.13

The correlation between the fund returns is 0.17. An investor has a risk-aversion of 8. In her optimal complete portfolio (including stocks, bonds, and risk-free assets), what is the proportion of the risk-free asset?

2.

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 0.05. The probability distribution of the risky funds is as follows:

	Expected ret.	std. dev.
Stock fund	0.17	0.28
Bond fund	0.08	0.12

The correlation between the fund returns is 0.13.

Jessica has a risk aversion level of 6. In her optimal complete portfolio (including stocks, bonds, and risk-free assets), what is the proportion of the stock fund?