Assume that you manage a risky portfolio with an expected rate of return of 16% and standard deviation of 20%. The risk-free rate rate on a Treasury-bill is 8%.

a. Your client chooses to invest 60% of a portfolio in your fund and 40% in a risk-free T-bill money market fund. What is the expected return and standard deviation of your clients portfolio?

b. Suppose another investor decides to invest in your risky portfolio a proportion (w) of his total investment budget so that his overall portfolio will have an expected rate of return of 9%. What is the proportion w? What is the standard deviation of the rate of return on this clients portfolio?