2. The best complete portfolio for a particular investor is designated by:

1. The point of highest reward to variability ratio in the opportunity set.
2. The point of tangency with the opportunity set and the capital allocation line.
3. The point of tangency with iso-utility curve and the capital allocation line.
4. The point of the highest reward to variability ratio in the indifference curve.

3. You invest $100 in a risky asset with an expected rate of return of 15% and a standard deviation of 15% and a T-bill with a rate of return of 5% and E (U)= E(r) - 0.5A². Suppose your risk aversion factor is 5. What weight would you assign to the risk-free asset?

1. 0.8889.
2. 0.1111.
3. 0.2457.
4. 0.2111.

4. Which of the following statements regarding the Capital Allocation Line (CAL) is TRUE?

1. The slope of the CAL is called the variability-to-reward ratio.
2. The slope of the CAL equals the increase in expected return of a risky portfolio per unit of the standard deviation.
3. The slope of the CAL is also called the Shark ratio.
4. The slope of the CAL equals the increase in the standard deviation of a risky portfolio per unit of expected return.