(CML) On the occasion of your birthday, your wealthy Aunt Hilda sends you a check for $5,000, under the express condition that you invest the money in either (or all) of the following: government bonds, Hilda’s Hybrids Inc., and/or Hilda’s Hubby Inc. The relevant statistics on each of these investments are provided below.

a. Graph the capital market line—that is, all the combinations of investment in the risk-free asset and the two companies. Provide results in table form as well. Start by finding the proportions of the two risky assets in the market portfolio.

b. Suppose you decide to invest in the following proportions: 40%
government bonds, 60% in the market portfolio M. Calculate the expected return and variance of returns for this portfolio.

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1 A B HILDA'S PRESENT C D Hilda's Hilda's Government 2 3 Expected return 4 Variance Hybrids Hubby bond 30.00% 16.25% 10.00% 0.2858 0.1000 5 Sigma 53.46% 31.62% 6 7 Covariance of returns 0.0343 8 Correlation of returns 0.2026