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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 5.5%. The probability distributions ofthe risky funds are:Expected ReturnStandard DeviationStock fund (S)15%32%Bond fund (B)923The correlation between the fund returns is .15.Tabulate and draw the investment opportunity set of the tworisky funds. Use investment proportions for the stock fund of 0% to100% in increments of 20%. What expected return and standarddeviation does your graph show for the minimum-varianceportfolio?Draw a tangent from the risk-free rate to the opportunityset.
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