Assume analysts provide the following information. Assume short sales are allowed.

Stock	Expected Return	Standard Deviation
1	12%	4%
2	10%	6%
3	9%	5%

Correlation Coefficients	Stock 1	Stock 2	Stock 3
Stock 1	1	0.75	0.5
Stock 2		1	-0.25
Stock 3			1

a) What is the optimum portfolio if the lending and borrowing rate is 4%? What are the expected return and the standard deviation of this optimal portfolio? (4 marks)

b) Simon claims that there is an efficient portfolio called Portfolio A having expected return 8% and standard deviation 4%. Draw the Capital Market Line and mark the positions of Portfolio A, Stock 1, 2, 3 and the optimum portfolio in (a). (4 marks)

c) Validate Simon's claim in question (b). (2 marks)

Please help, CORRECT AND FULL WORKING OUT answer will thumb up.

Thank you in advanced