Risk free asset with a rate of return

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Bob and Ann both make optimal portfolio allocations. Bob has $ 1000 to invest, Ann has $ 2000 to invest. There are 3 assets that they can invest in: a risk free asset with a rate of return of 5%, and two risky assets with the following properties:

Asset A has expected return of 10% and standard deviation of return of 12%.
Asset B has expected return of 17% and standard deviation of return of 20%.

The correlation between the return on asset A and return on asset B is 0.2. Assume now that Bob's optimal portfolio is $ 300 in the risk free asset, $ 300 in asset A and $ 400 in asset B. Ann's optimal portfolio has $ 900 invested in asset B, answer

Reference no: EM13988387

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