Assume That MM's Perfect Capital Markets Conditions Are Met and That

Multiple Choice

Assume that MM's perfect capital markets conditions are met and that you can borrow and lend at the same 5% rate as With.You have $5000 of your own money to invest and you plan on buying With stock.Using homemade (un) leverage,how much do you need to invest at the risk-free rate so that the payoff of your account will be the same as a $5000 investment in Without stock?

A) $5000
B) $0
C) $2500
D) $4000
E) -$5000 (borrow $5000)