Problem:
If Michael is investing his $50,000 and wants to form a portfolio with an expected return of $9,000 at the end of one year by putting his money in risk-free asset and his broker's fund. The risk-free lending and borrowing rate is 4%. The broker's fund expects to earn a return of 12% net of fee and a standard deviation of 15%.
Requirement:
Question 1: What would be the dollar amount of his positions in the risk-free asset and his broker's fund, respectively?
Question 2: What is the standard deviation of his portfolio?
Note: Please show guided help with steps and answer.