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 .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.) Standard deviation % b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Proportion invested in the T-bill fund % b-2. What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Proportion Invested Stocks % Bonds %

To perceive the party of influence to endue in hoard 1 that will
result in the foolhardy portfolio with

the utmost Sharpe kindred the forthcoming formula to indicate the
gravity of claim in foolhardy portfolio should be used

Where

Bond

E[R(d)]=

7.00%

Stock

E[R(e)]=

14.00%

Bond

Stdev[R(d)]=

37.00%

Stock

Stdev[R(e)]=

43.00%

Var[R(d)]=

0.1369

Var[R(e)]=

0.1849

T bil

Rf=

5.30%

Correl

Corr(Re,Rd)=

0.0459

Covar

Cov(Re,Rd)=

0.0073

Therefore W(*d)=

0.1755

W(*e)=(1-W(*d))=

0.8245

Expected render of foolhardy portfolio=

12.77%

Foolhardy portfolio std adulteration =

36.34%

Desired render=

12%

= tbill render*correlation endueed in tbill+foolhardy portfolio render
*(1-return*correlation endueed in tbill)

0.12=0.053*Correlation endueed in Tbill+0.1277*(1-Proportion
invested in Tbill)

Correlation endueed in Tbill (response b.1)=
(0.1277-0.12)/(0.1277-0.053)

=0.1

correlation endueed in foolhardy portfolio = 1-*correlation endueed in
tbill

=0.9

Correlation endueed in hoard capital (response b.2)=correlation endueed
in foolhardy portfolio *gravity of hoard capital

=0.74

Correlation endueed in tie capital (response b.2)=correlation endueed
in foolhardy portfolio *gravity of tie capital

=0.1579

std adulteration of portfolio (response a) = std of foolhardy portfolio*proportion
invested in foolhardy portfolio