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 rate of 7%. The probability distribution of the risky funds is as follows:

	Expected Return		Standard Deviation
Stock fund (S)	22	%	32	%
Bond fund (B)	12		19

The correlation between the fund returns is 0.11.You require that your portfolio yield an expected return of 11%, and that it be efficient, on the best feasible CAL.

1. What is the standard deviation of your portfolio?

2. What is the proportion invested in the T-bill fund and each of the two risky funds?