Assuming risk free rate to be 2% p.a while market return is expected to be 8% return with a Standard Deviation of 10%, answer the following two questions using Markowitz Model of lending and borrowing at risk free rate

Questions: (15 MARKS)

a) River Park fund aims to earn a 12% Return on their Portfolio comprising of equities tracking the Dow Jones and Risk free Securities. To achieve this goal, how much risk will they have to assume? Show the risk return combination for the fund with the weights

b) AIG can take a maximum portfolio risk of 5%. How much return can they expect with this risk appetite from a portfolio comprising of risky stocks and Risk free asset. Show the risk return combination for the fund with the weights