You plan to invest in a portfolio which comprises an equity (risky) fund and a T-bill money market fund. The equity fund invested 60% in stock A and 40% in stock B. The expected return of stock A is 26%. The expected return of stock B is 12%. The variance of the equity fund is 8.41%. T-bill rate is 3%.

a. What is the expected return of the equity fund?

b. What is the slope of the CAL?

c. If your degree of risk aversion (or price of risk) is 2.8, what proportion, y, of the total investment should be invested in the equity fund?

d. If you decide to invest 120% of your money in the equity fund, what are the investment proportions in stock A, in stock B, and in T-bill fund?

e. If you decide to invest 120% of your money in the equity fund, what is the expected return of your complete portfolio?