What is proportion invested in each of the two risky funds

Reference no: EM132206364

Question - 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 5.8%. The probability distributions of the risky funds are:

	Expected Return	Standard Deviation
Stock fund (S)	19%	48%
Bond Fund (B)	9%	42%

The correlation between the fund returns is .0762.

Suppose now that your portfolio must yield an expected return of 17% and be efficient, that is, on the best feasible CAL.

a. What is the standard deviation of your portfolio?

b-1. What is the proportion invested in the T-bill fund?

b-2. What is the proportion invested in each of the two risky funds?

Reference no: EM132206364

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