Question 6 The expected rate of return on the market portfolio is 23.0% and the rate of return on T-bills (the risk-free rate) is 7.0%. The standard deviation of the market returns is 32%. Assume that the market portfolio is efficient. a. What is the equation of the capital market line? b. If an expected return of 39.0% is desired, what is the standard deviation of this position? c. If you have $1,000 to invest, how should you allocate the money (between the market portfolio and the risk-free asset) to achieve this position? d. If you invest $300 in the risk-free asset and $700 in the market portfolio, how much money should you expect to have at the end of the year? e. Calculate the Sharpe ratio and the Treynor ratio for the market portfolio. Trudy, a financial analyst, typically invests in a master list of 30 equities drawn from several industries. A client of his made the following statement: ""I trust your stock-picking ability and believe that you should invest my funds in your best five ideas. Why invest in 30 companies when you obviously have stronger opinions on a few of them?" Trudy wants to respond to his client in the context of portfolio theory. f. Contrast systematic risk and firm-specific risk, and give an example of ench type of risk. & Critique the client's suggestion based on your answer for question 1-part B