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)	15	%	32	%
Bond fund (B)	9	%	23	%

The correlation between the fund returns is 0.15. Suppose now that your portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL. a. What is the standard deviation of your portfolio?

b-1. What is the proportion invested in the T-bill fund?

b-2. What is the proportion invested in each of the two risky funds?