Consider the following information about the risky portfolio that you manage and a risk-free asset: () = 11% = 15% = 5%

a.Your client, Mary, wants to invest a proportion of her total investment in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 9.5%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset?

b. What will be the standard deviation of the rate of return on her portfolio?

c. Your other client, John, wants the highest return possible subject to the constraint that you limit his standard deviation to be no more than 10%. Which client is more risk averse? (Hint: First, you need to determine the weights for Johns portfolio based on the risk of the portfolio. Then you compare the weights of Marys and Johns portfolio.)