Question
A pension fund manager is considering three mutual funds. The first is a stock fund, the...
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 rate of 3.00 %. The probability distributions of the risky funds are:
Expected Return: Standard Deviation
Stock fund (S) 12.00% 41.00%
Bond fund (B) 5.00% 30.00%
The correlation between the fund returns is 0.0667. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds?
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