Government and corporate bond fund

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Reference no: EM13922542

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.)

Reference no: EM13922542

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