Mr. Miles is a first-time investor and wants to build a portfolio using only U.S. T-bills and an index fund that closely tracks the S&P 500 Index. The T-bills have a return of 5 percent. The S&P 500 has a standard deviation of 20 percent and an expected return of 15 percent.

1. Draw the CML and mark the points where the investment in the market is 0 percent, 25 percent, 75 percent, and 100 percent.
2. Mr. Miles is also interested in determining the exact risk and return at each point.