Problem 2: Suppose the entire securities market consist of Treasury bills (the risk-free security) together with only 5 stocks: V, W, X, Y, and Z. After much research on means and covariances you use the portfolio optimizer to find the efficient frontier and tangency portfolio T as shown below: 0.5 0.45 0.4 Expected Return 0.35 0.3 0.25 W. 0.2 A v . 0.15 0.1 0.05 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 Std. Dev. a) Which of the portfolios, A B C D T, can you conclude must involve borrowing or short selling? Circle the portfolios in the line above and explain in three sentences or less. If there is not enough information to conclude any portfolios involve borrowing or short selling, explain why. (2 points) b) Your brother in law has invested all his savings in stock W. Among the labeled stocks and portfolios, ABCD T V W X Y Z , what could you recommend to him that dominate his current investment? Circle the ones you'd recommend and explain in three sentences or less. If none dominate his current investment, explain why. (2 points)C} If you could invest in T-bills {the risk-free asset} and ONE of the stocks, '4' W X Y 2, which stock would you choose? Name the stock and ex plain in three sentences or less. [2 points] d} If the Capital Asset Pricing Model [CAPM] is correct, which steel-2V W K Y E has the highest beta? Name the stock and explain in three sentences or less. If there is not enough information to determine, explain why. {2 points] e] If the Capital Asset Pricing Model [CAPM] Is correct, which stock V W X '1' 2 has the high est idiosyncratic variance? Name the stock and explain in three sentences or less. If the re is not enough information to determine, explain why. [2 points] -nI-nlnm 3e