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What is the proportion invested in the t-bill fund

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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 rate of 5%. The probability distribution of the risky funds is as follows:

 

Expected return

Standard deviation

Stock fund (s)

17%

27%

Bond fund (B)

9

12

The correlation between the fund returns is 0.10.

a) What are the investment proportions in the minimum-variance portfolio of the two risky funds,

b) What is the expected value and standard deviation of its rate of return?

c) You require that your portfolio yield an expected return of 14%, and that it be efficient, on the best feasible CAL.

d) What is the standard deviation of your portfolio?

e) What is the proportion invested in the T-bill fund and each of the two risky funds?

Reference no: EM133035800

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