1. 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 5.5%. The probability distributions of the risky funds are:

   • Stock Fund (S): Expected return = 12% and standard deviation = 32%
   • Bond Fund (B): Expected return = 8% and standard deviation = 23%
   • The correlation between the fund returns is 0.15.

   Which of the following is closest to the Sharpe Ratio for the optimal risky portfolio?

   		0.2487
   		0.2031
   		0.1872
   		0.2180