Question 3 a) Your current portfolio of investments has an expected rate of return of 12% and a standard deviation of 16%. Table 1 shows the information about four risky portfolios A, B, C, and D. If your objective with portfolio selection is to efficiently diversify risk and you wanted to add one of these four portfolios to your current portfolio, explain, in no more than 100 words, which portfolio you would prefer and why would you not consider the other portfolios. Portfolio Table 1 Expected Return Standard (%) Deviation (%) Correlation with current portfolio 0.35 A 13% 15% B 17% 25% 0.85 10% 15% 0.30 D 16% 25% 0.80 [7 marks] b) Explain, in no more than 100 words, why the Sharpe ratio of a portfolio that lies to the right of the optimal risky portfolio on the capital allocation line is different from the Sharpe ratio of the optimal risky portfolio. [6 marks] C) Explain, in no more than 100 words, how investors' degree of risk tolerance influences the choice of their optimal complete portfolio from the set of all feasible choices. [6 marks) [Total 19 marks]