Use the following information to answer the questions below.

CAPM data:

Market portfolio: E[RM ]=18%, M =0.2 Risk-free asset: Rf = 6%

T-bills are also available. They are considered riskless and have a corresponding rate of

return. You have $20,000 to invest. You will combine T-bills and the market portfolio to build a portfolio

a) What are T Bills, and T Bills?

b) Consider Portfolio X comprised of T-Bills and a $25,000 investment in the market portfolio.

i) Find x.

ii) Solvefor x.

c) Determine the weights of T-Bills and the market portfolio that combined would create

a portfolio X with an expected rate of return of 20%.