Problem 4: risk aversion and capital allocation (16 points) Consider a risky portfolio with expected rate of return of 12% and standard deviation of 25%. The risk- free rate of return is 4%. A. Compute the expected return and standard deviation for the following combinations [8 points] (0% risky, 100% risk-free) (10% risky, 90% risk-free) (20% risky, 80% risk-free) (30% risky, 70% risk-free) (40% risky, 60% risk-free) (50% risky, 50% risk-free) (60% risky, 40% risk-free) (70% risky, 30% risk-free) (80% risky, 20% risk-free) (90% risky, 10% risk-free) (100% risky, 0% risk-free) (110% risky, -10% risk-free) (120% risky, -20% risk-free) B. Create a plot that has the risk-free asset, the risky portfolio, and the capital allocation line (CAL). Clearly indicate each of those. What is the slope of this CAL? [4 points] C. Consider an investor with risk-aversion coefficient of 2.0. What combination of the risky investment and risk-free asset is optimal for this investor? Compare this to the optimal allocation for an investor with risk aversion coefficient of 4.0. [4 points]