1. (4 pts) Assume you have constructed an optimal risky portfolio that consists of the following asset classes: The risky portfolio has an expected return of 10% and a standard deviation of 15%. Weights Large Stocks 50% Mid-Cap Stocks 20% Corp bonds 30%

There are also risk-free (cash) investments available that offer a 1.5% return.

You have $100,000 to invest and you are somewhat risk adverse and you are wanting to reduce your overall volatility (standard deviation) to 10.5%. How will your $100,000 be allocated in order to achieve a standard deviation of 10.5% on the complete portfolio and what is the expected return of your position.

Large Stocks = $_____________ Corp Bonds = $_______________ Mid-Cap Stocks = $___________ Cash =$_____________________

Expected return of your position is equal to _________________%