In a World Where Riskless Borrowing or Lending Is Possible

Multiple Choice

In a world where riskless borrowing or lending is possible at 6%, if the expected return to the optimal risky asset portfolio is 12%, and you want a target return of 15%, what must you do?

A) Borrow an amount equal to 25% of your wealth and put 125% of your wealth in the risky portfolio.
B) Borrow an amount equal to 50% of your wealth and put 150% of your wealth in the risky portfolio.
C) Invest half your wealth in the risky portfolio and the other half in bonds.
D) Invest 75% of your wealth in risky assets and 25% in bonds.