An investor has been of the opinion that it would be most advantageous for him to invest in a fund that reflects the market, as he is aware that a diversified portfolio reduces risk.

He has been reading about the CAPM methodology and has just read about the possibility of adjusting his risk appetite, by investing in 2 assets, on the one hand the fund

which he has already invested in and such risk-free interest rates. He is pondering the following:

The fund's return, which reflects the market, has generally been yielding a 15% annual return (rm).

The risk associated with this return measured as the standard deviation of the return has been 20% (St.Devm).

The risk-free interest rate (IFL) is currently close to 4% and it can be assumed that the investor can borrow and borrow on terms equal to the risk-free interest rate.

If the investor is willing to take a risk of a position deviation of 30%.

a) How would his investment be in these two assets (what would be the proportions)? Wf and Wm?

b) What would be his expected return on this new portfolio (rP)?