Question: You survey a client and you conclude that she can tolerate a standard deviation T of at most 12%. You can allocate your client's wealth

You survey a client and you conclude that she can tolerate a standard deviation T of at most 12%. You can allocate your client's wealth into a corporate bond fund, a common stock fund, and a U.S.TBills (risk-free), with the following means and standard deviations: The correlation between the stock fund and the bond fund is B,s=0.7. d) Find the weights your client should allocate into the bond fund (wB), the common stock fund (wS), and into the risk-free asset (wf). (Remember that wB+wS+wf=1). (5 points) wB=wS=wrf= e) Finally, find the return of the portfolio that you found in d). Verify that the standard deviation of the risky portfolio is exactly 15%. (5 points)

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