Your client, Emma Chang, holds a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills. The information below refers to these assets.

E(rp) = 15%

P= 8.5%

T-Bill rate = 3%

Proportion of Complete Portfolio in P = 70%

Proportion of Complete Portfolio in T-Bills = 30%

Composition of P:

Stock X

Stock Y

Stock Z

30%

50%

20%

What is the equation of Emma's capital allocation line (CAL)?

Select one:

E(rC) = 0.03 + (1.514 Standard Deviation of C)

E(rC) = 0.15 + (1.1412 Standard Deviation of C)

E(rC) = 0.085 + (1.121 Standard Deviation of C)

E(rC) = 0.20 + (1.167 Standard Deviation of C)

E(rC) = 0.03 + (1.412 Standard Deviation of C)