Calculate your answers and plot them in the expected return standard deviation space Chart. (Plot all on the same graph, starting with part a).

	Expected return	St. Deviation
S&P 500 index	8%	20%
International (non-US) Stocks	10%	35%
Risk Free Asset	3%	0%

Assumption: Correlation between the S&P 500 index and the international stocks is 18%. T-bills have zero correlation with US or International (non-US) stocks.

a) What is the expected return and standard deviation of the portfolio that you currently hold which is 80% invested in the S&P 500 index, and 20% in T-bills?

b) What is the expected return and standard deviation of a portfolio consisting of 70% S&P 500 and 30% International (non-US) Stocks? Name new portfolio World Portfolio, or WP). Plot that portfolio on the same graph.

c) Combine the newly created World Portfolio (WP) with T-bills, to form a new Capital Market Line (Name it World Capital Market Line.) Which capital market line, the U.S. one or the World one is better, and why? Plot the two capital market lines on the graph.

d) Can a new portfolio consisting of a mix between the World Portfolio and T-bills have the same standard deviation as the current portfolio (the one that is 80% invested in the S&P 500 index, and 20% in T-bills)? What is the expected return on that portfolio? How much of it is invested in T-bills and how much in the world portfolio? (Use the graph for help, and plot the new position on graph).