Optimize a portfolio consisting of two stocks and cash invested at the risk free rate given that the maximum tolerable risk is portfolio sigma = 0.1, r = 0.01, returns are 0.1 and 0.05 respectively, stock volatilities are 0.4 and 0.2. The correlation between two stocks is -0.5. Short selling is not allowed. I know that we have to maximize returns subject to risk allowed. But I am confused about the risk will be equated to…will it be risk free rate or the maximum risk allowed? Also to solve the optimization in matlab should I use quadprog?