1. Consider the following information about a mutual fund portfolio that you manage and information on the risk free rate:

Expected Return of mutual fund 11%

Standard Deviation of mutual fund returns 15%

Money market account 3%

Client A wants to invest a portion of her total investment assets in your fund to provide an overall expected rate of return on her portfolio of 8%. What proportion of her assets should she invest in your fund? What will be the standard deviation of returns on her assets? If Client B wants the highest return possible with the limit of a 12% standard deviation, what is his expected return? What is the Sharpe ratio on the mutual fund?

2. In Excel, graph the capital allocation line for the risky mutual fund based on the data given in Problem 1.