Suppose the two stocks Stock A and Stock B are the only risk$-$bearing assets in existence available to investors. Further, suppose there is a bank that offers an interest rate of $2\mathrm{.}18\%$ on deposited capital $($risk$-$free$)$ and a lending rate of $6\mathrm{.}18\%.$ Share A has a expected return of $16\%$ and a standard deviation of $23\mathrm{.}29\%$ and Share B has a

expected return of $5\%$ and a standard deviation of $8\mathrm{.}42\%.$ As the lending

and the deposit rate is different, the CML will no longer take the shape of a straight line. Instead CML consists of three different parts. The first part is a straight line extending from the deposit rate and touches the portfolio front. The second part picks up there he first part ends and extends along the front of the portfolio to the point where a straight line extending from the lending rate touches on that portfolio front. The third part is a straight line and starts where the other part ends and has the same slope as a straight line that extends from the lending rate and touches the portfolio front.

The key portfolio when you invest part of your capital in the bank has an expected

yield of $8\mathrm{.}45\%$ with a standard deviation of $7\mathrm{.}22\%.$ The Key Briefcase when you

mortgage their portfolio has an expected return of $13\mathrm{.}81\%$ with one standard deviationof $18\mathrm{.}03\%.$ Calculate the weight of Stock A in an optimal portfolio with an expected yield of $12\mathrm{.}70\%.$

$($Correct answer: $0\mathrm{.}7)$