Suppose you manage a mutual fund that has an expected return of 15% with a standard deviation of 20% for the coming year. One of your clients is thinking about investing his $10,000 in your fund and a money market fund which generates 3% riskless return.

a. If your client wants his overall portfolio to have an expected return of 10%, how much should he invest in your fund? In other words, what is y of his "Complete portfolio"?

b. If your client wants to maximize his overall portfolio expected return but limit the standard deviation to 12%, how much should he invest in your fund?

c. Please draw the Capital Allocation Line (CAL) in the following diagram. Note that y axis is expected return, not risk premium.