5. You have $500,000 available to invest. The risk-free rate as well as your borrowing rate is 8%. The return on the risky portfolio is 16%. If you wish to earn a 22% return, you should __________.

A. invest $125,000 in the risk-free asset

B. invest $375,000 in the risk-free asset

C. borrow $125,000

D. borrow $375,000

6. You are considering investing $1,000 in a complete portfolio. The complete portfolio is comprised of treasury bills that pay 5% and a risky portfolio, P, constructed with 2 risky securities X and Y. The weight of X and Y in P are 70% and 30% respectively. X has an expected rate of return of 14% and Y has an expected rate of return of 10%. The dollar values of your positions in X, Y, and treasury bills respectively would be __________, __________ and __________ if you decide to hold a complete portfolio that has an expected return of 9%.

7. Consider an investment opportunity set formed with two securities that are perfectly negatively correlated. The global minimum variance portfolio has a standard deviation that is always __________.

A. equal to the sum of the securities standard deviations

B. equal to -1

C. equal to 0

D. greater than 0

8. The term efficient frontier refers to the set of portfolios which _________________.

A. yield the greatest return for a given level of risk

B. involve the least risk for a given level of return

C. Both a and b above

D. None of the above answers are correct