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Find expected value and standard deviation

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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. The probability distribution of the funds is as follows:

Expected Return Standard Deviation

Stock Fund(S) 20% 15%

Bond Fund(B) 10% 5%

T-bill Fund(T) 5% 0%

The correlation between the stock fund and bond bund is 0.3.

The correlation between the T-bill money market fund and the other funds is 0.

(a) The manager chooses to invest 70% of a portfolio in stock fund (S) and 30% in bond fund (B). What is the expected value and standard deviation of the rate of return on his portfolio?

Reference no: EM132694271

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