Q$2$ SET $($C$)$

Consider two portfolios of stocks, A and B$,$ which have the following annual expected returns

and standard deviations of returns:

Your client, a $42-$ year old conservative investor asks your advice on investing $10,00,000$

in a new portfolio. She wants her new portfolio to have a standard deviation of returns

equal to $8\%$ and insists that a part of her investment should be in a risk free asset. She is

happy to invest the remaining amount in either portfolio $A$ or $B.$ What is the highest

expected return that this client can obtain? How much of her money would she invest in

the risk free asset?