1. Let (_i,_i) for i = 1,2,...,n be the volatilities and expected returns of n risky investments. The expected return and volatility of the market portfolio are _M = 4% p.a. and _M = 18% p.a., respectively. The efficient frontier (for the risky investments) is given by the equation

² = 56² 2.24 + 0.0324.

Note that this equation is satisfied when = 0.18 and = 0.04 (the market portfolio).

1. 1. Find the risk-free rate of interest with annual compounding.
2. 2. Find the equation for the Capital Market Line (an equation of the form = a+b). (Round the coefficients to 6 decimals.)
   3. Let P be the portfolio consisting of 10% of the risk-free investment and 90% of the market portfolio. Find the expected return and volatility.