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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 cure rate of 5.3%. The probability distributions of the risk funds are:

 

 

Expected Return

Standard Deviation

  Stock fund (S)

14

%

43

%

  Bond fund (B)

7

%

37

%

 

 

The correlation between the fund returns is .0459.

 

Suppose now that your portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL.

 

a.

What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M91595431

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