A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.8%. The probability distributions of the risky funds are:

	Expected Return		Standard Deviation
Stock fund (S)	18	%	38	%
Bond fund (B)	9	%	32	%

The correlation between the fund returns is .1313. Suppose now that your portfolio must yield an expected return of 15% and be efficient, that is, on the best feasible CAL.

a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Str Dev = ANS. 28.50

b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Proportion invested in the T-Bill fund: ANS. 8%

b-2. What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Proportion invested in stocks? unsure

Proportion invested in bonds? unsure

A pension fund monager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund theat yields a sure rate of 4.8 % . The probability distributions of the risky funds are: Expected Return 18 Standard Deviation Stock fund (S) Bond fund (B) 38 32% The correlation between the fund returns is 1313. Suppose now that your portfolio must yield an expected return of 15% and be efficient, thet is, on the best feasible CAL a. What is the standerd devietion of your portfolio? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Answer is complete and correct. Standard 28.50 daviation b-1. What is the proportion invested in the T-bill fund? (Do not round Intermedlate calculations. Round your answer to 2 declmal places.) Answer is complete and correct Proportion invested in the T-bill fund 8.00 b-2 What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Proportlon Invested 79.29 % Stocks 27.00 % Bands