A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long- term bond fund, and the third is a money market fund that provides a safe return of 7%. The characteristics of the risky funds are as follows: Expected Return Standard Deviation Stock fund (S) 23% 28% Bond fund (B) 15 17 The correlation between the fund returns is 0.12. You require that your portfolio yield an expected return of 13%, and that it be efficient, that is, on the steepest feasible CAL. Required: What is the standard deviation of your portfolio? What is the proportion invested in the money market fund and each of the two risky funds?

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