Given:

Expected rate of return of a risky portfolio = 25%

Standard deviation of a risky portfolio = 18%

Risk-Free rate of return for T-bills = 3%

Risk Aversion coefficient = 2

(a) What would be the optimal proportion that you would invest in T-bills? What would be the optimal proportion that you would invest in the risky portfolio?

(b) What is the expected return of the overall portfolio?

(c) Graph the CAL