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1. Suppose you have a risk-free security with a risk-free return of 5%. You are also interested in two nah! ca in two other securities, cleverly named a and b with the following risk/return characteristics (note that 0.11 Security Expected Return 10% 20% Standard Deviation 15% 25% a. Compute the weights of the minimum risk portfolio. b. Compute the expected return on the minimum risk portfolio. C. Compute the standard deviation on the minimum risk portfolio. d. Compute the weights for the optimal risky portfolio with a risk-free asset. e. Compute the expected return for the optimal portfolio f. Compute the standard deviation on the optimal portfolio . Suppose you had $500,000 to invest, and you wished to be 25% invested in the risk-free asset, and 75% invested in the risky assets to maximize your return for a given level of risk: 1. What are the weights for your portfolio? 2. How much in dollars would you invest each of the assets? 3. What is the expected return of your portfolio in both percentage and dollar terms? 4. What is the standard deviation of your portfolio in both percentage and dollar terms? h. Suppose you wished to have an expected return of 10 percent. How would you combine these three assets to achieve this level of return for the minimum level of risk? 1. What are the weights for each asset? 2. What is the standard deviation for this portfolio? i. Suppose you wished to have a standard deviation of 12 percent. How would you combine these three assets to achieve this level of risk for the maximum level of return? 1. What are the weights for each asset? 2. What is the expected return for this portfolio? i Note that the expected return on asset a is 10 percent and the standard deviation on asset a is 15 percent. Why shouldn't an investor simply invest in asset a to achieve this level of return in part h

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