In this problem we assume that the annual expected rate of return of the market portfolio is 22% and the annual risk-free rate is 2%. The standard deviation of the market portfolio returns is 22%. Assume the market is in equilibrium such that the Capital Asset Pricing Model (CAPM) holds: the market portfolio is efficient. If you have $1,000 to invest, how should you allocate it to achieve an annual expected return of 26%? Borrow $200 at the risk-free rate and invest $1,200 in the market portfolio O Invest $260 in the risk-free asset and $740 in the market portfolio Invest $200 in the risk-free asset and $800 in the market portfolio 0 O Invest $800 in the risk-free asset and $200 in the market portfolio Borrow $260 at the risk-free rate and invest $1,260 in the market portfolio Invest $1,200 in the risk-free asset and sell short $200 in the market portfolio