You were given the opportunity to invest in two stocks (A and B) for your portfolio. You were told that the expected returns of A and B are 10% and 20%, respectively; and the risks of A and B are 20% and 40%, respectively. You know that the correlation coefficient between the two stocks is -0.4 and the risk-free rate is 3%. What would be your allocations (i.e. weights) in the two stocks if you want to put together a portfolio that:

(i)Provides you the lowest possible level of risk?

(ii) Provides you with the best risk and return trade off?

Suppose your investors coefficient of risk aversion is 5. What would be your allocations (i.e. weights) in the riskfree asset and the two stocks if you want to put together a portfolio that: (iii)Provides you the highest level of satisfaction?