The risky portfolio A consists of 1000 shares of DREXLA and 4000 shares of OGATO. Assume that DREXLA has a share price of $6, an expected return of 18%, and a standard deviation of 22%. OGATO has a share price of $4, an expected return of 14%, and a standard deviation of 20%. The correlation between the two is 0.6, and the risk-free rate of interest is 8%.

Required

a)Graph the Capital Allocation Line derived from the risk-free asset and portfolio A. (Label all axes and points carefully).

b)What fraction of your portfolio must you invest in A to have a portfolio standard deviation of 12%?