Problem $7-7$

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 $7\%.$ The characteristics of the risky funds are as follows:

Stock fund $)$

Bond fund $(B)$

Expected Return

$16\%$

$12$

Standard Deviation

$38\%$

$21$

The correlation between the fund returns is $0\mathrm{.}12.$

Solve numerically for the proportions of each asset and for the expected return and

standard deviation of the optimal risky portfolio. $($Do not round intermediate calculations.

Enter your answers as decimals rounded to $4$ places.$)$