A stock portfolio has an expected return of 12% and a standard deviation of 20%. A bond portfolio has an expected return of 6% and a standard deviation of 9%. The two portfolios have a correlation coefficient of 0.3. T-Bills have an expected return of 2%. Your coefficient of risk aversion is 7.

a. What are the weights of the minimum variance portfolio that can be formed between the two portfolios if they are the only risky assets being considered? b. What is the expected return and standard deviation of the minimum variance portfolio?

c. What is the optimal amount you would allocate between T-Bills and the risky portfolio?

d. What is the expected return and standard deviation of your complete portfolio that combines the T-Bills and risky portfolio?