In: Finance
A pension fund manager is considering three assets. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill yielding 0.06. The probability distribution of the risky funds is as follows:
Expected ret. | std. dev. | |
Stock fund | 0.18 | 0.3 |
Bond fund | 0.12 | 0.14 |
The correlation between the fund returns is 0.2.
What is the expected return of the optimal risky portfolio?
Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.