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 9%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 17% 11 Standard Deviation The correlation between the fund returns is 0.10. Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation 30% 22 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.) Problem 7-4 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 8%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 17% 13 The correlation between the fund returns is 0.12. a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Portfolio invested in the stock Portfolio invested in the bond Standard Deviation 38% 18 Expected return Standard deviation a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) Rate of Return Problem 7-9 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 6%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) Expected Return 24% 14 The correlation between the fund returns is 0.14. Standard deviation You require that your portfolio yield an expected return of 16%, 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.) Money market fund Stocks Bonds Standard Deviation 33% 22 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.) Proportion Invested % % %