Part A

Screenshot of question:https://i.gyazo.com/2f7a0b1edb19168915914a8edfb39473.png

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 sure rate of 5.5%. The probability distributions of the risky funds are:

	Expected Return	Standard Deviation
	15%	32%
	9%	23%

The correlation between the fund returns is .15.

What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Part B

An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 14% and a standard deviation of return of 20.0%. Stock B has an expected return of 10% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is 0.50. The risk-free rate of return is 6%. The proportion of the optimal risky portfolio that should be invested in stock A is _________.

Options:

0%, 50%, 30%, 56%