You are interested in a moderately aggressive investment with some high-risk assets. You decide to construct a complete portfolio (C) consisting of the optimal risky portfolio (O) and the U.S. T-bill (risk-free). The optimal risk portfolio (O) will include a stock fund (S) and a bond fund (B). 5%, respectively. Suppose that you have derived that the optimal risky portfolio (O) invests 35% in S and 65% in B. Accordingly, the expected return and standard deviation of the optimal risky portfolio (O) will be:

The expected return on the optimal risky portfolio (O) is 12%

The standard deviation of the optimal risky portfolio (O) is 22%

The U.S. T-bill rate is 2%.

A. Your risk aversion (A) is 3. Find the proportion of the optimal risky portfolio and the risk-free asset in your complete portfolio (c).

B. What are the expected return and standard deviation of your complete portfolio (C)?

C. What is the overall asset allocation of the complete portfolio

(C), i.e., the proportion of money invested in each asset? Note: You must show your calculation steps briefly and clearly.