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 yields a sure rate of 5.3%. The probability distributions of the risky funds are:

Expected Return Standard Deviation Stock fund (S) 14% 43%

Bond fund (B) 7% 37%

The correlation between the fund returns is 0.0459.

What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Answer 1