Question: There are 3 investments available:

1) Stock Fund B, Expected Return = 30% , Standard Deviation = 30%;

2) Stock Fund A, Expected Return = 20%, Standard Deviation = 60%;

3) T-bills, Expected Return = 5%. Note that the correlation coefficient between funds A and B is .1.

1) Find the optimal risky portfolio and its expected return and standard deviation.

2) Find the slope of the CAL supported by T-bills AND the optimal portfolio.

3) What percentage of their assets will an investor with A=5 invest in Funds A and B? AND What percentage will they invest in T-bills?

4) What percentage of their TOTAL ASSETS will the investor in part C have invested in Fund A?