You are the financial adviser to three individuals, a Young person with high risk tolerance, a Middle aged person with medium risk tolerance and an old person with low risk tolerance. Here are the current conditions:

Risk free asset earning 4% per year.

Risky asset, (or market portfolio), with expected return of 18% per year and standard deviation of 20%.

Use the mutual fund theorem (Separation theorem).

a. Construct an appropriate portfolio for your young client and estimate the expected return and standard deviation of your young client for the coming year. 80 to 90 % Risky assets 20 to 10 % Risk Free asset.

b. Construct an appropriate portfolio for your middle aged client and estimate the expected return and standard deviation of your middle aged client. 50 to 70 % Risky assets to 50 to 30 % Risk Free asset.

c. Construct an appropriate portfolio for your old client and estimate the expected return and standard deviation of your old client. 30 to 60 % Risky assets to 70 to 40 % Risk Free asset.

d. If your middle aged client requires a portfolio with a standard deviation of 14%, what is its expected rate of return?

Show all work! DO NOT COPY PREVIOUS POSTS!