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1.Find the weight for the bond in the optimal risky portfolio P*.

2Find the weights for the stock in the optimal risky portfolio P*.

3.What is the expected return of the optimal risky portfolio P*?

4.What is the standard deviation of the optimal risky portfolio P*?

A pension fund manager is considering the three financial assets: (1) A stock S, (2) a second stock B, and (3) a T-bill T that yields a risk-free rate of 2% The probability distribution of the two risky assets are: E(R) 20 Stock S Stock B 15 The correlation between stock S and stock B is 0.10