Suppose Sarah Can Borrow and Lend at the Risk Free-Rate

question 44

Multiple Choice

Suppose Sarah can borrow and lend at the risk free-rate of 3%.Which of the following four risky portfolios should she hold in combination with a position in the risk-free asset?

• A) portfolio with a standard deviation of 15% and an expected return of 12%
• B) portfolio with a standard deviation of 19% and an expected return of 15%
• C) portfolio with a standard deviation of 25% and an expected return of 18%
• D) portfolio with a standard deviation of 12% and an expected return of 9%

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