What is the standard deviation of your portfolio

Reference no: EM132206282

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

	Expected Return	Standard Deviation
Stock fund (S)	20%	30%
Bond fund (B)	12	15

The correlation between the fund returns is 0.10.

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

a. What is the standard deviation of your portfolio?

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

Reference no: EM132206282

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