The risk-free asset has a return of 5%. The market portfolio has an expected return of 20%

and a standard deviation of 40%. A portfolio that holds both assets has an expected return of

27.5%. This portfolio also has:

(I) A standard deviation larger than 40%.

(II) A negative weight in the risk-free asset.

(III) A positive weight in the risk-free asset.

I and III only

II only

I only

III only

I and II only