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Your friend has $18,000 invested in a portfolio P with expected return of 15% and volatility of 10%. Another portfolio Q is available with expected

Your friend has $18,000 invested in a portfolio P with expected return of 15% and volatility of 10%. Another portfolio Q is available with expected return of 25% and volatility of 15%. The risk-free T-bills rate is 5%. You want to invest $18,000 in a portfolio with higher expected return but the same volatility your friends portfolio has. What should you do?

  1. Invest $6,000 in P and $12,000 in T-bills
  2. Invest $12,000 in P and $6000 in T-bills
  3. Invest $12,000 in Q and short sell $6,000 of T-bills
  4. Invest $12,000 in Q and $6,000 in T-bills

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