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 5.9%. The probability distributions of the risky funds are:
Expected Return Standard Deviation
Stock fund (S) 20% 49%
Bond fund (B) 9% 43%
The correlation between the fund returns is .0721.
What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds?
Expected Return = ____________%
Standard Deviation = ______________%