Assume the following information pertains to two mutual funds

FUND	Expected Return	Standard Deviation of Return
Debt	6%	12%
Equity	12%	20%

Assume that the correlation between debt and equity is 30%. Recall that by definition, cov(a,b) = corr(a,b)s_as_b

a. (5) What is the expected return of a portfolio of 70%Debt and 30%Equity?

b. (10) What is the standard deviation of this portfolio of 70%Debt and 30% Equity? (Show your work for credit)

c. (5) Would all risk averse investors prefer the portfolio of 70%Debt and 30%Equity to a portfolio of 100% Debt? (Assume this question pertains to the complete portfolio of the investor). Explain your answer carefully. CREDIT is 100% on the BASIS OF YOUR EXPLANATION.