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Problem 7-7 A pension fund manager is considering three mutual funds. The first is a...

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Finance

Problem 7-7

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 6%. The characteristics of the risky funds are as follows:

Expected Return Standard Deviation
Stock fund (S) 21 % 28 %
Bond fund (B) 12 18

The correlation between the fund returns is 0.09. Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

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