You manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 32%. The T-bill rate is 3%.

Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolios standard deviation will not exceed 14%.

Required:

A) What is the investment proportion, y?

B) What is the expected rate of return on the complete portfolio?