James Bonet is an international investor, which faces the possibility to put his money in a portfolio of British Petroleum (BP) and/or Banco Santander (BS) shares, with an expected return 26% and 17%, respectively. On the other side, he knows the past risk measured by the standard deviation of returns, has been 16% for BP and 5.4% for BS, Knowing that the past correlation of returns between both shares has been O.1. James wants to know the expected return y total risk of the following portfolios, with a given percentage of both shares: a) Invest 20% in BP and 80% in BS b) Invest 40% in BP and 60% in BS c) Invest 60% in BP and 40% in BS d) Invest 80% in BP and 20% in BS

James Bonet also wants to know which will be the best portfolio of BS and BP shares if he can lend and borrow at a free interest rate of 14% and the market will be at equilibrium.