Please help me with the question below:

Assume your investments are already well diversified and you can both invest and borrow at the risky-free interest rate of 1%. You are a risk averse investor, but nothing is assumed about the degree of your risk aversion.

You must invest in some combination of Portfolio A, Portfolio B, and the risk-free asset (you may decide either to invest or borrow at the risk-free rate). You are NOT allowed to invest in the risk-free asset only. The portfolios have the following expected returns and betas:

Portfolio E[r] Beta

A 8% 0.5

B 12% 1.5

A. You should invest both in Portfolio A and B and either borrow or invest at the risk-free rate.

B. You should invest both in Portfolio A, but NOT in Portfolio B, and either borrow or invest at the risk-free rate.

C. You should invest both in Portfolio B, but NOT in Portfolio A, and either borrow or invest at the risk-free rate.