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Assume the Sharpe ratio (slope) of the best feasible capital allocation line you can get by combining an optimal risky portfolio and a risk-free asset

Assume the Sharpe ratio (slope) of the best feasible capital allocation line you can get by combining an optimal risky portfolio and a risk-free asset is 0.4. If the optimal risky portfolio has an expected return of 13% and a standard deviation of 26%, what should be the risk-free rate?

A.

1.00%

B.

2.60%

C.

4.60%

D.

8.84%

E.

5.00%

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