Draw tangent from the risk-free rate to opportunity set

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Reference no: EM132054781

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 4.8%. The probability distributions of the risky funds are:

expected return standard deviation

Stock Fund ( S )---------18%-------------38%

Bond Fund ( B )----------9----------------32

the correlation between the fund returns is .13

Draw a tangent from the risk-free rate to the opportunity set. What does your graph show for the expected return and standard deviation of the optimal risky portfolio?

Reference no: EM132054781

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