Use the following information about Asset 1 and Asset 2 to answer the following questions:

a. What portfolio, defined by the weights in assets 1 and 2, (w1,w2) has an expected return equal to 4.375%?

b. What is the expected return on the portfolio that is invested 80% in risky asset 1 and 20% in risky asset 2?

c. What is the standard deviation of the portfolio invested 80% in risky asset 1 and 20% in risky asset 2?

d. What is the slope of the Capital Allocation Line (CAL) formed by that 80/20 portfolio of assets 1 and 2 and the risk-free instrument?

e. Consider a portfolio of risky assets with an expected return of 4% and standard deviation of 3.5%. If an investor allocates 25% of their wealth to this portfolio and 75% to the risk free asset, assuming the risk-free rate is 1.50%, what are the expected return and standard deviation of that portfolio?

Expected Return 4% 6% Standard Deviation 5% 7% Asset 1 Asset 2 0.0007 1.50% covariance 1,2 risk free rate =