You are the new investment manager of Michael and Ariel. You received from the previous investment manager of Michael and Ariels partial information regarding their portfolios: - Both have an optimal portfolio. - The expected return in Michaels portfolio is 6%. - The SD in Ariels portfolio is 12%. You know that the current risk-free interest rate is 5% and the market portfolio has an expected return of 8% and a SD of 10%. a. What is the proportion of each brothers investment in a risk-free asset out of their portfolio?

b. Is it possible to rank the brothers risk preference? Explain.

c. What is the beta in each brothers portfolio?

d. Suppose that today Michael and Ariel received an offer to buy a share with an expected return of 6% and beta of 0.3. Will they accept the offer?