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 sure rate of 3.0%. The probability distributions of the risky funds are:

	Expected Return	Standard Deviation
Stock fund (S)	12%	41%
Bond fund (B)	5%	30%

The correlation between the fund returns is 0.0667.

What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

The answer for above problem is explained below.

nle knoa that, Expeckd etus W hese h's Weigut of the Stoc^. 0.08179 59 0. 2416919 hW^ : O. 33 84 3 and, WB weigar of the bond

O 33 842 0.0406 + 0,0330 Expected etun on port-folio 's, E (T)рг |0,07 36781 Coð) 17. 36787. standard deviahon, alculah ơn

0.0036733 )G -o, 2496

.. standard devich.qv is, 0-34 und