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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 8%. The probability distribution of the risky funds is as follows:
Expected Return   Standard Deviation
Stock fund (S)      19% 32%
Bond fund (B) 12% 15% The correlation between the fund returns is 0.11.


i.   What are the investment proportions in the minimum-variance portfolio of the two risky funds?
ii.   What is the expected value and standard deviation of its rate of return?

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