1. You are a fund manager in ABC asset management and you wish to invest in two different funds. Fund A is a stock fund and fund B is comprised of long-term government and corporate bond. The expected return and standard deviation of the funds are as follows: Table 1: Expected return and standard deviation of stocks A and B Stock fund A Bond fund B Expected Return 8% 13% Standard Deviation 12% 20% The correlation between funds A and B is 0.30. The risk free rate is 6%. Assume there is no short selling. a. Calculate the minimum-variance portfolio of the two risky funds and also show the expected return and standard deviation of this portfolio. 10 marks (300 words) b. Using the following weights find out the expected returns and standard deviations of each of these asset mix and graphically present the efficient frontier of the two risky funds. Table 2: Weights of stocks A and B Weight Weight Stock Fund A Bond Fund B 1.0 0.0 0.9 0.1 0.8 0.2 0.7 0.3 0.6 0.4 0.5 0.5 0.4 0.6 0.3 0.7 0.2 0.8 0.1 0.9 0.0 1.0 20 marks (700 words)