Posted: February 27th, 2021
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a Tbill money market fund that yields a sure rate of 3.0%. The probability distributions of the risky funds are
What is the standard deviation of your portfolio?
What is the proportion invested in the Tbill fund
What is the proportion invested in each of the two risky funds?
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a Tbill money market fund that yields a sure rate of 3.0%. The probability distributions of the risky funds are: 

Expected Return 
Standard Deviation 

Stock fund (S) 
12 
% 
41 
% 
Bond fund (B) 
5 
% 
30 
% 
The correlation between the fund returns is .0667. 
Suppose now that your portfolio must yield an expected return of 9% and be efficient, that is, on the best feasible CAL. 
a. 
What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) 
Standard deviation 
% 
b1. 
What is the proportion invested in the Tbill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) 
Proportion invested in the Tbill fund 
% 
b2. 
What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) 

Proportion Invested 
Stocks 
% 
Bonds 
% 
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