a. You approach your broker to borrow money against securities held in your portfolio. Even though the loan will be secured by the securities in your portfolio, the brokers rate for lending to customers is 6 percent. Assuming a risk-free rate of 4 percent and an expected market return of 12 percent with a standard deviation of 14 percent, draw the capital market line related to your investment opportunities.

b. Estimate your expected return and risk if you invest 25 percent of your portfolio in the risk- free asset. What if you decide to borrow 25 percent of your initial wealth and invest the money in the market?