The following expected return and the standard deviation of current returns are known: your method.

Market Portfolio Security (i) T-Bills A B Expected Return Standard Deviation 0.20 0.20 0.05 0.12 0.15 0.12 0.10 0 (5 points) 0.8 1.1 B 0 1

a) Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and the market portfolio.

b) Determine which of A or B is over-valued or undervalued.

c) How will you invest $1000 riskless T-bills and the risky assets in the Market Portfolio to maintain a standard deviation of 10%.

Question 1 (5 points) The following expected return and the standard deviation of current returns are known: Security (1) A B T-Bills Market Portfolio Expected Return Standard Deviation 0,20 0.12 0.12 0.10 0.05 0 0.20 0.15 Bi 1.1 0.8 0 1 a a) Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and the market portfolio. b) Determine which of A or B is over-valued or undervalued. c) How will you invest $1000 in riskless T-bills and the risky assets in the Market Portfolio to maintain a standard deviation of 10%