Economics homework help
Economics homework help. In a world of one risk-free and one risky asset, an investor faces the following values:Expected return on risky portfolio E(rP) = 0.12SD of risky portfolio ?P = 0.25Risk-free rate rf = 0.05In what follows the notation is such that:y = fraction of the complete portfolio in the risky portfolioE(rC) = return on the complete portfolio?C= SD of the complete portfolioa) What does the complete portfolio look like for the investor who says, “I won’taccept more than ?C =10% (SD in my complete portfolio)?” In other words what is y(the percentage of risky asset), and what is 1-y (the percentage of the risk free asset) for this investor? Show your work. b) What is E(rC) for this investor? Show your work. c) What does the complete portfolio look like for the investor who says, “I want toachieve a 15% expected return, at minimum risk of course.”In other words, what is y and (1-y) for this investor? Show your work. (Hint: Don’t be discouraged if y>1 and thus (1-y) is negative. Remember an investor can borrow money at risk free rate)