A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 8%. Thecharacteristics of the risky funds are as follows:

Expected ReturnStandard DeviationStock fund (S)17%38%Bond fund (B)1318

The correlation between the fund returns is 0.12.

Required:

a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds?

a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return?