Section A 1. The expected returns and standard deviations for a stock fund (S), a bond fund (B) and the T-bill, which is the risk-free asset (f), are given below. Fund Expected return SD S 10% 19% B 5% 8% f 3% 0% We construct the optimal risky portfolio using the stock and bond funds. We calculate the weights of the stock and bond funds in the optimal risky portfolios using the formula for the weight of the optimal portfolio of two risky assets (Equation 6.10). Accordingly, we find that the optimal weight of the stock fund is 43.2% and the optimal weight of the bond fund is 56.8%.

+) The correlation coefficient between S and B is 0.2.

(1) Calculate the expected return of the optimal risky portfolio

(2) Calculate the standard deviation of the optimal risky portfolio

(3) Calculate the Sharpe ratio of the optimal risky portfolio

(4) Answer (4.1) to (4.4) based on the following information.