1. You manage a portfolio consisting of stocks only, with an expected rate of return of 18% and a standard deviation of 30%. The Treasury bill rate is 4%. a) Sam invests 60% of his portfolio into your fund and 40% in the Treasury bill. What is the expected value and standard deviation of the investment? b) What is the expected Sharpe ratio of your risky portfolio? What is the Sharpe ratio of Sams? c) Draw the Capital Allocation Line that corresponds to the above. For the remainder of this question, assume that an investor has a mean-variance preference. d) What is the risk aversion coefficient of Sam? Draw the indifference curve of Sam into the CAL. Indicate where the indifference curve meets the CAL. e) Assume a risk aversion coefficient of 1.25. Find the optimal weight w invested in the risky portfolio. How would your answer change if you could only borrow at 6% from the bank?