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 4.8%. The probability distributions of the risky funds are:
expected return standard deviation
Stock Fund ( S )---------18%-------------38%
Bond Fund ( B )----------9----------------32
the correlation between the fund returns is .13
Suppose now that your portfolio must yield an expected return of 15% and be efficient, that is, on the best feasible CAL. What is the standard deviation of your portfolio? What are the proportion invested in the T-bill fund and each of two risky funds?