Question: Below you are given the expected return and standard deviations for Fund S and Fund B, as well as their correlation and the risk-free

Below you are given the expected return and standard deviations for Fund

Below you are given the expected return and standard deviations for Fund S and Fund B, as well as their correlation and the risk-free T-bill rate. Fund S Fund B T-bill Rate Expected or Mean Return 13.00% 5.00% 2.00% St Deviation 25.00% 10.00% Correlation betw S and B -0.20 a. Given that the optimal risky portfolio with Fund S and Fund B is formed by investing 34% in Fund S and 66% in Fund B, what is the expected return and standard deviation of the optimal risky portfolio? (4 pts) b. If you have a risk aversion coefficient of 10, how much weight will you put in the optimal risky portfolio vs T-bills in your complete portfolio? (4 pts)

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