Question 3 You are considering investing $150,000 in a T-bill that pays 5% and a risky portfolio, P. Portfolio P is a combination of TWO risky securities, X and Y. The weights of X and Y in portfolio P are 70% and 30%, respectively. X has an expected rate of return of 14% and variance of 16%, and Y has an expected rate of return of 10% and a variance of 25%. The correlation between X and Y = -1. If you wish to form a portfolio with an expected rate of return of 12%,

a. What percentages of your money must you invest in the T-bill and P, respectively?

b. What is the standard deviation of portfolio P?

c. What is the slope of the capital allocation line (CAL)?