a. Plot the following risky portfolios on a graph: Portfolio ABCDEFGHExpected return (r...

a. Plot the following risky portfolios on a graph:

b. Five of these portfolios are efficient, and three are not. Which are inefficient ones?

c. Suppose you can also borrow and lend at an interest rate of 12%. Which of the above portfolios has the highest Sharpe ratio?

FIGURE 8.11

d. Suppose you are prepared to tolerate a standard deviation of 25%. What is the maximum expected return that you can achieve if you cannot borrow or lend?

e. What is your optimal strategy if you can borrow or lend at 12% and are prepared to tolerate a standard deviation of 25%? What is the maximum expected return that you can achieve with this risk?