(Please Use Excel and show all the work and formulas)

Q1, You were given the opportunity to invest in two stocks (A and B) for your portfolio. You were told that the expected returns of A and B are 18% and 22%, respectively; and the risks of A and B are 14% and 16%, respectively. You know that the correlation coefficient between the two stocks is 0.8 and the risk-free rate is 3%. What would be your allocations (i.e. weights) in the two stocks if you want to put together a portfolio that:

a. Provides you the lowest possible level of risk? Show your work.

b. Provides you with the best risk and return trade-off? Show your work.

Suppose your investors coefficient of risk aversion is 6. What would be your allocations (i.e. weights) in the riskfree asset and the two stocks if you want to put together a portfolio that:

c. Provides you the highest level of satisfaction? Show your work.