Suppose you are given the following data.

Asset	Expected Return	Volatility
A	0.05	0.30
B	0.09	0.40
Risk-free	0.01	0.00

In addition, the correlation coefficient between the returns of assets A and B is 0.50. Assume that assets A and B (and portfolios combining the two assets) are the only risky assets in the economy.

(a) Suppose that you are considering investing in a risky portfolio (Asset P) consisting of 25% A and 75% B. Calculate the expected return and volatility of asset P. (8 points)

(b) Suppose you can combine either asset P, asset A or asset B with the risk-free asset to form a complete portfolio. Calculate which asset should be combined with the risk-free asset to give any investor with mean-variance preferences the highest utility. (5 points)

(c) Assuming that asset P is the optimal risky portfolio, determine the weights of assets A, B, and the risk-free asset in the optimal complete portfolio for an investor with mean-variance utility and risk aversion A = 2. (7 points)