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 5.5%. The probability distributions of the risky funds are:
|
Expected Return |
Standard Deviation |
| Stock fund (S) |
16% |
45% |
| Bond fund (B) |
7% |
39% |
|
The correlation between the fund returns is .0385.
What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds?