Consider the following assets:

	E(r)	SD	Beta
Asset A		30%	1
Market portfolio, M	8%	15%
Risk-free asset	2%

Currently all your clients funds are invested in stock A.

a) Currently, your portfolio contains only Asset A (basically a dont-make-any-financial-sense portfolio).

Assume that CAPM holds. Show with calculations how you can come up with a new portfolio that would improve your investment return while keeping your risk level the same as now. [Hint: Think about what calculations you need to do to answer the question.] (7 marks)

b) Draw the capital market line (CML) and show the position of stock A. (3 marks)