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Please explain answer Portfolio 1 2 3 Proportion in A 1 2/3 1/3 0 Proportion in B 0 1/3 2/3 1 4 b. Sketch (this
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Portfolio 1 2 3 Proportion in A 1 2/3 1/3 0 Proportion in B 0 1/3 2/3 1 4 b. Sketch (this does not have to be a work of art, but try to be careful) the feasible set of all portfolios composed of A and B. 2 c. Suppose that there is now the opportunity to borrow or lend at the risk-free rate of return, which is 3%. Show on your sketch in part (B) how this changes the investment opportunities available. (Be sure to clearly label this "PART C".) d. Assume you are a rational investor and can invest in stock A, stock B, the risk-free security, or any combination thereof. Further assume that you have $100,000 and decide to invest $10,000 in the risk-free security and $90,000 in risky securities. Approximately how much money will you invest in Security B? Briefly explain how you arrived at your answer. Portfolio 1 2 3 Proportion in A 1 2/3 1/3 0 Proportion in B 0 1/3 2/3 1 4 b. Sketch (this does not have to be a work of art, but try to be careful) the feasible set of all portfolios composed of A and B. 2 c. Suppose that there is now the opportunity to borrow or lend at the risk-free rate of return, which is 3%. Show on your sketch in part (B) how this changes the investment opportunities available. (Be sure to clearly label this "PART C".) d. Assume you are a rational investor and can invest in stock A, stock B, the risk-free security, or any combination thereof. Further assume that you have $100,000 and decide to invest $10,000 in the risk-free security and $90,000 in risky securities. Approximately how much money will you invest in Security B? Briefly explain how you arrived at yourStep by Step Solution
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