Discussion Post: Expected Return and Standard Deviation for the Minimum-Variance Portfolio
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 4.2%. The probability distributions of the risky funds are:
Expected Return Standard Deviation
Stock fund (S) 12% 33%
Bond fund (B) 5% 26%
The correlation between the fund returns is .0308.
What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.