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7. A pension fund manager is considering three mutual funds. The first is a stock fund (S), the second is a long- term bond

 

7. A pension fund manager is considering three mutual funds. The first is a stock fund (S), the second is a long- term bond fund (B), and the third is a money market fund that provides a safe return of 5%. The characteristics of the risk funds are as follows: S3 S B Correlation Expected Return 19% 9% 0.55 Standard Dev. 40% 18% Tabulate and draw (in Excel) the investment opportunity set of the two risky funds. Use investment proportions for the stock fund of 0% to 100% in increments of 20%. Identify the most efficient portfolio.

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