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:

	Expected Return		Standard Deviation
Stock fund (S)	16	%	45	%
Bond fund (B)	7	%	39	%

The correlation between the fund returns is .0385.

Suppose now that your portfolio must yield an expected return of 14% and be efficient, that is, on the best feasible CAL.

What is the standard deviation of your portfolio? What is the proportion invested in the T-bill fund? What is the proportion invested in each of the two risky funds?