Your client has $10,000,000 of cash available for investment. The expected return on your equity market fund is 25% per year with a standard deviation of 50%, that on your risky long-term corporate bond fund is 15% per year with a standard deviation of 20%, and you estimate the unconditional correlation between the annual returns of these two risky funds at 0.30. The annual rate of return on risk-free government bills 10%.

Determine your clients optimal capital allocation between the risk-free government bills and the optimal risky portfolio constructed above if her utility function is quadratic with a risk aversion coefficient of A = 5 and compute the expected return and standard deviation of the resulting optimal complete portfolio. 3: Suppose your client desires to keep the standard deviation of her complete portfolio at a maximum level of 20%. Determine the portfolio with the maximum rate of return that would be able to satisfy this constraint.