What is the standard deviation of your portfolio

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Reference no: EM132072981

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 4.3%. The probability distributions of the risky funds are:

Expected Return Standard Deviation

Stock fund (S) 13 % 34 %

Bond fund (B) 6 % 27 %

The correlation between the fund returns is .0630.

Suppose now that your portfolio must yield an expected return of 11% and be efficient, that is, on the best feasible CAL.

a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Standard deviation %

b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Proportion invested in the T-bill fund %

b-2. What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Proportion Invested

Stocks %

Bonds %

Reference no: EM132072981

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