Suppose an investor uses two stocks A and B to build a risky portfolio. The following information is given: E(rA)=10%, E(rB)=12%, A=15%, B=20%, AB=0.4, rf=2%. Denote the optimal risky portfolio investor can achieve with the highest Sharpe ratio by portfolio O

1. Calculate the weights of A and B (wA and wB) in the optimal risky portfolio O. (5 pts)

2. Calculate the expected return and standard deviation of return for portfolio O. (6 pts)

3. Calculate the Sharpe ratio of portfolio O. (4 pts)