What is the optimal mix of a risky portfolio of stocks and 10 Year U.S. Government Bonds, assuming future annual stock returns of 10% with volatility of 20%, future annual 10 Year U.S. Government Bond returns of 5% with annual volatility of 8%, correlation of stocks to 10 Year U.S. Government Bonds of 0.25 and a constant risk-free rate of 4%? What are the approximate cash, stock and bond weights for a complete portfolio for an investor with a target complete portfolio return of 6% that is using the maximum Sharpe ratio objective for the risk portfolio? What is the risk of this complete portfolio?

wBwS=[E(rB)rf]S2+[E(rS)rf]B2[E(rB)rf+E(rS)rf]BSBS[E(rB)rf]S2[E(rS)rf]BSBS=1wB