2. You are considering investing in two risky portfolios. The first one has an expected return of 13%

with a standard deviation of 24%. The second portfolio has an expected return of 15% and a

standard deviation of 29%. The risk-free rate is 4%.

a. You will invest 50% of your portfolio into one of the risky portfolios and the remainder in

the risk-free asset. Find the best risky portfolio to invest in, and calculate the expected

return and standard deviation of your 50/50 portfolio. (5 points)

b. What is the Sharpe ratio of each risky portfolio and your 50/50 portfolio?