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The market portfolio has an expected return of 9%. Portfolio A has an expected return of 11%. The risk-free rate is 2%. According to the
The market portfolio has an expected return of 9%. Portfolio A has an expected return of 11%. The risk-free rate is 2%. According to the CAPM, how should an investor optimally achieve an expected return of 10.0% if the investor has $100,000 in cash?
a.Invest $114,285.70 in the market portfolio, and borrow $14,285.70 at the risk-free rate.
b.Invest $88,888.89 in Portfolio A, and lend $11,111.11 at the risk free rate.
c.Invest $50,000 in Portfolio A, and invest $50,000 in the market portfolio.
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