Minimum-variance portfolio of the two risky funds

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Reference no: EM13890698

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 5.5%. The probability distributions of the risky funds are:

Expected Return Standard Deviation

Stock fund (S) 15% 32%

Bond fund (B) 9% 23%

The correlation between the fund returns is 0.15.

What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds?

Reference no: EM13890698

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