This question has two sub-questions.

Assume that t-bills generates a return of 3 %. Which of the following risky portfolios is the optimal risky portfolio?

Now assume that you wish to have a total expected return on your portfolio of 5 %, how much of your funds should be invested in the optimal risky portfolio, and how much in t-bills, respectively?

	E(r)
Portfolio A	12 %	25 %
Portfolio B	13 %	30 %
Portfolio C	10 %	24 %

Select one:

a. Portfolio A is the optimal risky portfolio and you should have 32 % in the risky portfolio and the rest in t-bills.

b. Portfolio A is the optimal risky portfolio and you should have 22 % in the risky portfolio and the rest in t-bills.

c. At least two of the risky portfolios are equally preferable.

d. Portfolio C is the optimal risky portfolio and you should have 37 % in the risky portfolio and the rest in t-bills.

e. I cannot tell which risky portfolio that is optimal with the given information.

f. Portfolio B is the optimal risky portfolio and you should have 20 % in the risky portfolio and the rest in t-bills.

g. Portfolio C is the optimal risky portfolio and you should have 29 % in the risky portfolio and the rest in t-bills.

h. Portfolio B is the optimal risky portfolio and you should have 25 % in the risky portfolio and the rest in t-bills.