1. An investor create a risky portfolio based on two stocks, A and B. Stock A has an expected return of 18% and a standard deviation of return of 20%. Stock B has an expected return of 14% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is .50. The risk-free rate of return is 10%. What is the expected return on the optimal risky portfolio?

2. A portfolio with a 20% volatility generated a return of 12% last year when T-bills were paying 3%. What is Sharpe ratio of this portfolio?