A fund manager is considering two mutual funds The first is a stock fund and the other is a bond fund 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 30 Bond Fund 12 15 Calculate the expected return and standard deviation of the minimum variance portfolio b Calculate the expected return and standard deviation of portfolios invested in the two funds with weights as follows Wstocks Wbonds 100 0 80 20 60 40 40 60 20 80 0 100 Draw the investment opportunity set of the two risky funds and mark the minimum variance portfolio (based on parts a and b) If you were to use only the two risky funds, and still require an expected return of 14 Calculate the investment proportions of your portfolio and the standard deviation of the portfolio (Hint use the portfolios expected return to calculate the investment weights of each fund Remember that w Bonds 1 w Stocks Then use the weights to calculate the standard deviation of the portfolio)

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A fund manager is considering two mutual funds. The first is a stock fund and the other is a bond fund. The correlation between the

A fund manager is considering two mutual funds. The first is a stock fund and the other is a bond fund. 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%	30%
Bond Fund	12%	15%

Calculate the expected return and standard deviation of the minimum-variance portfolio.

b. Calculate the expected return and standard deviation of portfolios invested in the two funds with weights as follows:

Wstocks Wbonds

100%	0%
80%	20%
60%	40%
40%	60%
20%	80%
0%	100%

Draw the investment opportunity set of the two risky funds and mark the minimum-variance portfolio (based on parts a and b).
If you were to use only the two risky funds, and still require an expected return of 14%. Calculate the investment proportions of your portfolio and the standard deviation of the portfolio (Hint: use the portfolios expected return to calculate the investment weights of each fund. Remember that w_Bonds = 1 w_Stocks . Then use the weights to calculate the standard deviation of the portfolio).