Transcribed Image Text
3.A pension fund manager is considering three mutual funds. Thefirst is a stock fund, the second is a long-term government andcorporate bond fund, and the third is a T-bill money market fundthat yields a sure rate of 4.4%. The probability distributions ofthe risky funds are: Expected ReturnStandard DeviationStock fund(S)14%34%Bond fund(B)5%28%The correlation between the fund returns is .0214.Suppose now that your portfolio must yield an expected return of13% and be efficient, that is, on the best feasible CAL.a. What is the standard deviation of yourportfolio? (Do not round intermediate calculations. Roundyour answer to 2 decimal places.)Standard deviation ______ %b-1. What is the proportion invested in theT-bill fund? (Do not round intermediate calculations. Roundyour answer to 2 decimal places.)Proportion invested in the T-bill fund ______ %b-2. What is the proportion invested in each ofthe two risky funds? (Do not round intermediatecalculations. Round your answers to 2 decimal places.)ProportionInvestedStocks%Bonds%