How might Jenny optimally invest: portfolio and risk associated.

Given the following

RF = 5% p.a.
RM = 12% p.a.
RiskM = 10% p.a.

Describe how Jenny might optimally invest $1,000,000 in a portfolio of financial assets to earn an expected return of 14% p.a. and determine the risk that she would face in doing so. State all necessary assumptions.

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...he risk that she would face in doing so. State all necessary assumptions.

Assume: Jenny can hold a large diversified portfolio approximate to the market portfolio.

RP = (1 - XF) RM + XF x RM

14 = (1 - XF) 12 + 5 XF

14 = 12 - 12XF ...