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 vields a sure rate of 5.5%, The correlation between the stock and bond fund returns is 0.25.The probability distributions of the risky funds are:

                                 Expected Return      Standard Deviation

Stock Fund (S)             15%                                32%

Bond Fund (B)               9%                                 23%

What is the standard deviation of the portfolio that yields an expected return of 12%?

O 21.06%

O 27.50%

O 19.70%

O 21.91%

Answer 1

Correct Answer Is D Standard Deviation Of Portfolio = 21.91%