2. (46 POINTS) A pension fund manager is considering investing in 2. mutual funds: a stock fund (S), a long-term government and corporate bond fund (B). The following table presents the expected return and standard deviation of the stock fund and of the bond fund: T Expected return (ri) Standard deviation (Oi) .24 .40 Stock fund (S) Bond fund (B) .12 .20 The correlation between the stock fund and the bond fund is p= = .25 = (c) A Treasury Bill money market fund is now available with an 8% safe return (rf .08). Draw the capital market line (CML). Identify the intercept with the vertical axis and the tangency point with the efficient portfolio frontier for risky assets. What is the efficient set in this case? 2. (46 POINTS) A pension fund manager is considering investing in 2. mutual funds: a stock fund (S), a long-term government and corporate bond fund (B). The following table presents the expected return and standard deviation of the stock fund and of the bond fund: T Expected return (ri) Standard deviation (Oi) .24 .40 Stock fund (S) Bond fund (B) .12 .20 The correlation between the stock fund and the bond fund is p= = .25 = (c) A Treasury Bill money market fund is now available with an 8% safe return (rf .08). Draw the capital market line (CML). Identify the intercept with the vertical axis and the tangency point with the efficient portfolio frontier for risky assets. What is the efficient set in this case