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%

---

Definitions:

Opiates

A group of drugs, derived from the opium poppy, used to treat pain by mimicking the body’s pain-relieving chemicals, but can also lead to dependency.

Marijuana

A psychoactive drug from the Cannabis plant used for medical or recreational purposes.

Methadone

A synthetic opioid used for pain management and as part of drug addiction detox programs, particularly for heroin.

Placenta

A structure that forms in the uterus while pregnant, supplying the fetus with oxygen and nutrients while also eliminating waste via the umbilical cord.