Problem:

Consider the following table:

		Stock Fund	Bond Fund
Scenario	Probability	Rate of Return	Rate of Return
Severe recession	.10	38%	8%
Mild recession	.20	14%	5%
Normal growth	.40	16%	6%
Boom	.30	25%	4%

f. Show graphically the optimal portfolio.

g. Compute the expected return and risk of the optimal portfolio

h. If you will invest 30 % in the risk free and the rest in the optimal portfolio. Compute the expected return and risk of the complete portfolio.

i. Compute the slope of the CAL.