# . (1.5 pt) Bob and Ann both make optimal portfolio allocations. Bob has \$ 1000 t

. (1.5 pt) Bob and Ann both make optimal portfolio allocations. Bob has \$ 1000 toinvest, Ann has \$ 2000 to invest. There are 3 assets that they can invest in: a risk freeasset 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 assetA and \$ 400 in asset B. Ann’s optimal portfolio has \$ 900 invested in asset B, answerthe following questions:(a) How much does Ann invest in the risk free asset? How much does Ann invest inasset A?(b) Which investor is more risk averse? Why?(c) Compute the expected return and standard deviation of return on Bob’s and Ann’s optimal portfolios.