8. A stock portfolio (A) has an expected return of 13.5% and standard deviation of 27.0%, and a bond portfolio (B) expected return of 6.5% and standard deviation of 13.0%. THE optimal risky portfolio of A and B has an expected return of 10.42% and a standard deviation of 16.68%. The correlation between A and B is 0.10 and the risk-free rate is 4.5%. Maggie has risky portfolio of A and B with weights of 65.0% and 35.0%, respectively.

a. Maggie has risk aversion A=2.5. Compute the expected return and standard deviation for Maggies optimal complete portfolio.

b. What will be the value of Maggies investment positions in the stock portfolio, the bond portfolio and the risk-free asset if her optimal complete portfolio has a total value of $820,000?

c. Assume the correlation between A and B is -0.10. Find the expected return and standard deviation of i) Maggies optimal risky portfolio (in the absence of a risk-free asset), and ii) THE optimal risky portfolio (given the existence of the 4.5% risk-free asset). 3 bonus points