A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long term government & corporate bond fund and the third is a T Bill money market fund that yields a rate of 5.5%. The probability distributions of the risky funds are: Stock fund expected rate of return- 15%, standard deviation -32%. Bond fund expected rate of return- 9%, standard deviation 23%. The correlation between the fund return is 1.5

Suppose your portfolio must yield an expected rate of return of 12% and be efficient on the best feasible CAL, what is the standard deviation of the portfolio?

What is the proportion invested in the T Bill fund and each of the two risky fund?

If you were to use only the two risky fund and still require an expected return of 12%, what would be the investment proportion of your portfolio?