2. All assumptions of MPT hold and you choose your portfolio following the MPT. Sup- pose that you can borrow or lend money to the bank at the risk-free rate Ry = 2%. The capital market line that starts at this risk-free rate and is tangent to the effi- cient frontier has a slope of 0.40 and the tangency portfolio M has standard deviation OM = 10%. (a) What is the expected return E(R 20) of this tangency portfolio? (b) Suppose you are quite risk averse and can tolerate standard deviation of just 5%. How much of your wealth should you allocate to the tangency portfolio M and how much should you deposit to the bank at rate Rj? What is your expected return? (c) How much do you need to allocate to the tangency portfolio and the risk-free asset to achieve an expected return of 5%? What is the standard deviation of the resulting portfolio? (d) If you cannot borrow and want to create a portfolio with the highest possible Sharpe ratio, what is the highest expected return that you can achieve