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 5%. 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 14%, and that it be efficient, that is, on the steepest feasible CAL.

a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.)

b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.)

Stockfund(S)Bondfund(B)ExpectedReturn19%12StandardDeviation32%15 Standard deviation % \begin{tabular}{|l|c|c|} \hline & \multicolumn{2}{|c|}{ Proportion Invested } \\ \hline Money market fund & & % \\ \hline Stocks & & % \\ \hline Bonds & & % \\ \hline \end{tabular}