A pension fund manager is considering three funds. The first is a stock fun, the second is a long term bond fund, and the third is a risk- free T-bill fund that yields a rate of 9%. Assume that there is no limit for short selling a T-bill , the probability distribution of the risky funds is as follows:

	Expected return	Standard deviation
Stock fund(S)	0.22	0.33
Stock fund(B)	0.13	0.25

The correlation coefficient between the fund returns is 0.10.

Use the following simplified parameters:

The proportions of two risky funds of the optimal risky portfolio are:

Ws=0.7 Wb=0.3

The expected return of the optimal risky portfolio is 0.19, and standard deviation of the optimal risky portfolio is 0.25.

Client #1 requires that her portfolio yield an expected return of 0.15. Client #2 wants the highest return possible subject to the constraint that his standard deviation should be no more than 0.30.

A) For Client #1 , what is the proportion invested in the T-bill fund and each of the two risky funds?

B) Calculate the standard deviation of the client #1's portfolio

C) Assuming that both clients have a utility score of , where A is a positive coefficient. Whose A is bigger? Which is more risk averse ? Who is a lenders and who is a borrower? If any? You should support your answer.