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 Nasdaq tech stock (S) and a bond market fund (B):

• The expected return and standard deviation of S are 25% and 55%, respectively
• The expected return and standard deviation of B are 5% and 15%, respectively
• The correlation between S and B is 0
• T-bill rate is 2%

Based on the above information, you conclude that the optimal risky portfolio (O) should invest 36.00% in S and 64.00% 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%

1.  Your risk aversion Find the proportion of the optimal risky portfolio (= y) in your complete portfolio (C).
2. What is the expected return and standard deviation of your complete portfolio (C)?
3. What is the Sharpe ratio for your complete portfolio (C)?