Consider a stock fund (A) and a bond fund (B). The risk-free asset provides a risk-free rate of return of 8%. The expected return, standard deviation of the two risky funds and the correlation between their returns are as below:

E(r_A) = 20%, E(r_B) = 12%, _A = 30%, _B = 15%, _AB = 0.10

a. Find the Weights of each asset in the optimal risky portfolio, the Expected Return and the Standard Deviation of the optimal risky portfolio

b. Calculate the Sharpe ratio of the best feasible CAL.

c. Of the following four stocks, which do you think should offer the highest return to the investor? Which should offer the lowest? Explain why.

Stock	Standard Deviation	Beta
Stemma	40%	1.2
Mkod	65%	0.9
Tag	20%	1.4
Makuta	25%	1.0