The minimum-variance portfolio of the two risky funds

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Reference no: EM131852757

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 rate of 8%. The probability distribution of the risky funds is as follows:

Stock Fund (S): Expected Return 19%, Standard Deviation 32%

Bond Fund (B): Expected Return 12%, Standard Deviation 15%

The correlation between the fund returns is 0.11.

a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds. (Do not round intermediate calculations. Round your answer to 4 decimal places.)

a-2. What is the expected value and standard deviation of its rate of return? (Do not round intermediate calculations. Round your answer to 4 decimal places.)

Reference no: EM131852757

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