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 4.1%. The probability distributions of the risky funds are:

	Expected Return	Standard Deviation
Stock fund (S)	20%	32%
Bond fund (B)	15%	22%

The correlation between the fund returns is 0.43.

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.)

Expected return	%
Standard deviation	%

Answer 1