You are currently invested all of your money in the Omega Fund, a broad-based fund with an expected return of 14% and standard deviation of 20%. Your broker suggests you to add a real estate fund to your portfolio. The real estate fund has an expected return of 20%, standard deviation of 60%, and a zero correlation with the Omega Fund. Currently the risk-free rate of interest is 3.8%.

a)Is your brokers suggestion right? Explain briefly

b)Suppose you follow your brokers advice and put 60% of yourmoney in the real estate fund, and remaining 40% in Omega Fund.When you tell your finance professor about your investment, hesays that you should reduce your investment in the real estatefund. Is your finance professor right? Explain

c)You decide to follow your finance professors advice and reduceyour exposure to the real estate fund. Now the real estate fundrepresents 15% of your risky portfolio, with the rest of 85% in theOmega Fund. Discuss the advantage of such a switch