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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 bond fund, and

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 4%. The characteristics of the risky funds are as follows:
The correlation between the fund returns is 0.11.
You require that your portfolio yield an expected return of 12%, and that it be efficient, that is, on the steepest feasible CAL.
Required:
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?
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