You manage a risky portfolio with expected rate of return of 7% and standard deviation of 15%. The T-bill rate is 4%.

1.Suppose that your client prefers to invest in your fund a proportionythat maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio's standard deviation will not exceed 10%, what is the investment proportiony?

2.Your client's degree of risk aversion is A = 3, what proportion,y, of the total investment should be invested in your fund? What is the expected value and standard deviation of the rate of return on your client's optimized portfolio?