You have decided to construct a complete portfolio (C) using the U.S. T-bill (risk-free) and the S&P 500 Index. The expected return and standard deviation of the S&P 500 Index are 17% and 25%, respectively. The T-bill rate is 3%. Your risk aversion is 6.

A What will be the proportion of the S&P 500 Index in your complete portfolio (C)?

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

C One of your friends is investing 100% in the S&P 500 Index. She argues that her portfolio has a better risk and return trade-off than your complete portfolio. Would you agree with her? Briefly (in one or two sentences) explain why.

Note: Show your calculation steps briefly and clearly.