D E E D E D E   [(.80192 144) (.19812 400) (2 .8019 .1981 60)]1/2 11.29%   For the other points we simply increase wD from .10 to .90 in increments of .10; ac- cordingly, wE ranges from .90 to .10 in the same increments. We substitute these portfolio proportions in the formulas for expected return and standard deviation. Note that when wE 1.0, the portfolio parameters equal those of the stock fund; when wD 1, the portfolio parameters equal those of the debt fund. We then generate the following table: II. Portfolio Theory 8. Optimal Risky Portfolio The McGraw−Hill Companies, 2001           CHAPTER 8 Optimal Risky Portfolios 247       SOLUTIONS TO CONCEPT C H E C K S   wE wD E(r)   0.0 1.0 8.0 12.00 0.1 0.9 8.5 11.46 0.2 0.8 9.0 11.29 0.3 0.7 9.5 11.48 0.4 0.6 10.0 12.03 0.5 0.5 10.5 12.88 0.6 0.4 11.0 13.99 0.7 0.3 11.5 15.30 0.8 0.2 12.0 16.76 0.9 0.1 12.5 18.34 1.0 0.0 13.0 20.00 0.1981 0.8019 8.99 11.29 minimum variance portfolio   You can now draw your graph. 3. a. The computations of the opportunity set of the stock and risky bond funds are like those of question 2 and will not be shown here. You should perform these com- putations, however, in order to give a graphical solution to part a. Note that the covariance between the funds is