A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a Tbill money market fund that yields a rate of 8 percent. The probability distribution of the risky funds is as follows:
Expected Return 
Standard Deviation 

Stock fund (S) 
.20 
.30 
Bond fund (B) 
.12 
.15 
The correlation between the fund returns is 0.10.
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