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 6%. The characteristics of the risky funds are as follows:

	Expected Return				Standard Deviation
Stock fund (S)		17	%			38	%
Bond fund (B)		12				17

The correlation between the fund returns is 0.13. You require that your portfolio yield an expected return of 11%, and that it be efficient, that is, on the steepest feasible CAL. a. What is the standard deviation of your portfolio?

b. What is the proportion invested in the money market fund and each of the two risky funds?

Money Market Fund?

Stocks?

Bonds?