1. You are an investment advisor, and I am your client. I hate sigma and like E(R). There are many stocks in the world, but I want to invest in only two: GS (Goldman Sachs) and BRK.A (Berkshire Hathaway), and possibly the riskfree asset. You know: Stock E(R) in % in % GS 10 10 BRK.A 5 9 The correlation between these two assets returns is 0. The risk free rate is 2%. I want a portfolio that has a sigma of 12%. I have $300 to invest. How much should I invest in GS, BRK.A and the risk-free asset? To solve this problem: (a) First plot all possible portfolios of the two risky assets on a mean-sigma diagram in Excel. You must do it in Excel because you need it to be exact. (b) Then draw (by hand) a line from Rf on the Y-axis that is just tangent to this curve. Identify (approximately) the risky-asset portfolio at which it touches the curve. Read off the the (approximate) mean and standard deviation of that portfolio (the tangency portfolio) from the graph. Determine what portfolio of GS and BRK.A has that mean and that standard deviation. (c) Find what portfolio of the risk-free asset and this tangency portfolio has a sigma of 12%. Calculate the dollar amounts you would invest in each asset.