2. A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a bond fund, and the third is a T-bill fund that yields a rate of 8%. The correlation between the fund returns is 0.1. The expected returns and the standard deviations are as follows: Expected return SD Stock fund 20% Bond fund 12% 30% 15% a. What are the investment proportions in the minimum-variance portfolio of the two risky funds? 1 b. Calculate the expected return and standard deviation of the minimum-variance portfolio. c. Calculate the expected return and standard deviation of portfolios invested in the two risky funds with weights as follows: Wbonds Wstocks 0 1 0.2 0.8 0.4 0.6 0.6 0.4 0.8 0.2 1 0 d. Draw the investment opportunity set of the two risky funds and mark the minimum-variance portfolio (based on parts b and c). Expected return SD Stock fund 20% 30% Bond fund 12% 15% e. You require an expected return of 14% on your portfolio, which consists of the two risky funds. Calculate the investment proportions of your portfolio and the standard deviation of the portfolio (Hint: use the portfolio's expected return to calculate the investment weights of each fund. Remember that wBonds = 1 - Stocks . Then use the weights to calculate the standard deviation of the portfolio)