1. Assume you can invest in a risky fund with an expected return of 14% and a standard deviation of 20%. The T-bill rate is 6%. You have $120,000 to invest and you choose to allocate $70,000 in the risky portfolio and $50,000 in the T-bill money market fund.

1. What is the expected return of your portfolio? (5pt)

2. What is the standard deviation of the portfolio? (5pt)

3. (4pt) Draw the CAL of your portfolio on an expected return/standard deviation diagram. Clearly label all relevant information (5pt).

4. What is the slope of the diagram above?