Use the following information to answer parts A-D:

	Expected Return	Standard Deviation
Bond Fund	8%	5%
Stock Fund	16%	13%

Expected return Standard deviation Bond fund 8% 5% Stock fund 16% 13% Assume the correlation between the two funds is 0.25, the covariance is 35.7, T-bills have a return of 5%, and the optimal portfolio will have an investment of 40% in bonds and 60% in stocks.

A) What is the expected return and standard deviation for the optimal portfolio?

B) What is the Sharpe Ratio for the optimal portfolio?

C) Calculate the standard deviation if the client wanted to achieve an expected return of 10%.

D) To target the 10% return, what proportion of the portfolio would be invested in T-bills, the stock fund and the bond fund?