Intro Assume that there are only two stocks in the economy, stock A and stock B. The risk-free asset has a return of 3%. The optimal risky portfolio, i.e., the portfolio with the highest Sharpe ratio, is given below: A B D 1 Stock A Stock B Risk-free asset 2 Expected return 0.062 0.076 0.03 3 Variance 0.1089 0.0484 4 Standard deviation 0.33 0.22 Covariance 0.02178 6 Optimal risky 7 portfolio 8 Weights 0.1125 0.887 =1-18 9 Expected return 0.0744 =B8*B2+C8*C2 10 Variance 0.04385 =B8^2*B3+C812*C3+2*B8*C8*B5 11 Standard deviation 0.2094 =B10^0.5 12 Sharpe ratio 0.2121 = (B9-D2/B11 01 Part 1 - Attempt 1/10 for 10 pts. What is the expected return of a portfolio composed of 40% of the optimal risky portfolio and 60% of the risk-free asset? 4+ decimals Submit Attempt 1/10 for 10 pts. Part 2 What is the standard deviation of such a portfolio? 3+ decimals Submit