(a) (10 points) You borrow an amount equal to 25% of your capital at the risk-free interest rate r. In terms of the risk and return of the market, om and um, what is your portfolio's expected return rate jp and risk p? (Feel free to use any formula from the Capital Asset Pricing Model (CAPM).) (b) (10 points) Your portfolio has two securities with expected return rates MA and us. You are a risk-seeker and want to optimize your choice of weights wa and we by maximizing E(u(x)), where u(1) is your utility function. If us = ub, then does it matter what (risk-seeking) u(x) you pick? Explain your reasoning carefully. (Hint: remember how you set up Exercise 3.15 on p. 146 of the textbook.) (c) (6 points) If a security has an expected return rate u that is less than the risk-free return rate r, will that security be positively or negatively correlated with the market portfolio? Justify your answer. (a) (10 points) You borrow an amount equal to 25% of your capital at the risk-free interest rate r. In terms of the risk and return of the market, om and um, what is your portfolio's expected return rate jp and risk p? (Feel free to use any formula from the Capital Asset Pricing Model (CAPM).) (b) (10 points) Your portfolio has two securities with expected return rates MA and us. You are a risk-seeker and want to optimize your choice of weights wa and we by maximizing E(u(x)), where u(1) is your utility function. If us = ub, then does it matter what (risk-seeking) u(x) you pick? Explain your reasoning carefully. (Hint: remember how you set up Exercise 3.15 on p. 146 of the textbook.) (c) (6 points) If a security has an expected return rate u that is less than the risk-free return rate r, will that security be positively or negatively correlated with the market portfolio? Justify your