You have two financial assets to invest. The first one is a risk free asset with a return of 8%. The other one is a risky portfolio with an expected return of 16% and standard deviation of 25%.
a) If you form a complete portfolio investing 45% of your funds in the risk free asset and the remaining funds in the risky asset, what is the expected return and standard deviation of your complete portfolio?
b) If you want a portfolio with a standard deviation of 20%, what should be the composition of your portfolio?
c) If you want a portfolio with an expected return of 10%, what should be the composition of your portfolio?