1. our client has $200 million to invest in stocks. Half of that is their own capital and the rest will be borrowed at 3%, the risk-free rate. The following four assets are on the efficient frontier and annual expected return and risk are:

	Return	Standard Deviation
Mid Cap	15.0%	15.5%
Large Cap	15.5%	13.5%
Value Stocks	14.5%	13.0%
Growth Stocks	17.0%	18.5%

 

What is the maximum return, your client can expect to earn over the year, if they want their investment to be on the Capital Allocation Line?