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A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long - term government and corporate

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)20%30%
Bond fund (B)1215
The correlation between the fund returns is 0.10.
Tabulate the investment opportunity set of the two risky funds (use a similar table as below):
Proportion
in Stock Fund Proportion
in Bond Fund Expected
Return Standard
Deviation
0.00%100.00%
17.3982.61
20.0080.00
40.0060.00
45.1654.84
60.0040.00
80.0020.00
100.000.00
If the risk free rate is 8%, what is the optimal risky portfolio (the tangency portfolio, i.e. what are its weights, return and variance)?
Portfolio invested in the stock
Portfolio invested in the bond
Expected return
Standard deviation
What is the minimum variance portfolio?

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