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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 7%. The probability distribution of the risky funds is as follows:

Expected Return Standard Deviation
Stock fund (S) 16 % 38 %
Bond fund (B) 12 21

The correlation between the fund returns is 0.12.

What is the Sharpe ratio of the best feasible CAL?

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