Initial assets:

Asset A: Mean = 20% Standard Deviation =10%

Asset B: Mean = 10% Standard Deviation = 5%

risk free rate is 4%

Now, assume that the regulator legislates that borrowing at the risk-free rate iscompletely forbidden (lending is allowed).

(i)What is the minimal standard deviation of a portfolio that has expected return of 12%?

(ii)What is the minimal standard deviation of a portfolio that has expected return of 18%?