Risky Assets are A and B.

Mean return for A = 20%, Standard Deviation A = 10%

Mean Return for B = 10%, Standard Deviation for B = 5%

B.Now assume that there is a risk free asset. The risk-free rate (for borrowing and for lending) is 4%. The expected return of the market portfolio (= tangency portfolio, optimal risky portfolio) is 14%.

(i)What is the standard deviation of the market portfolio?

(ii)Plot (sketch) the efficiency frontier (the optimal investment opportunity set).

(iii)What is the minimal standard deviation of a portfolio that has expected return of 12%?

(iv)What is the minimal standard deviation of a portfolio that has expected return of 18%?