The risk free asset has return of 3.0 percent. The two risky assets you can invest in are Coke and Pepsi. Coke has a mean return of 12% and a standard deviation of 14%. Pepsi has mean return of 9 percent and standard deviation of 8 percent. The correlation between the two is 0.45. The tangency portfolio has a weight of 35% in Coke.

What is the expected return and standard deviation of the tangency portfolio?

You desire an expected return of 25%. What will be the standard deviation of your portfolio? What fraction of your portfolio will be invested in Pepsi?