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 8%. The probability distribution of the risky funds is as follows:

Expected Return Standard Deviation

Stock fund (S) 24% 30%

Bond fund (B) 12 19

The correlation between the fund returns is 0.13.

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

Portfolio invested in the stock

Portfolio invested in the bond

a-2. What is the expected value and standard deviation of its rate of return?