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 12% 5% Standard Deviation 33% 26% Stock fund (S) Bond fund (B) 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? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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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
Expected Return
12%
5%
Stock fund (S)
Bond fund (B)
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? (Do not round intermediate calculations. Round your answers
to 2 decimal places.)
deviation
Standard Deviation
33%
26%
11.21
28.63 %
Transcribed Image Text: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 Expected Return 12% 5% Stock fund (S) Bond fund (B) 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? (Do not round intermediate calculations. Round your answers to 2 decimal places.) deviation Standard Deviation 33% 26% 11.21 28.63 %
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