Suppose David Can Borrow and Lend at the Risk-Free Rate

Multiple Choice

Suppose David can borrow and lend at the risk-free rate of 5%.Which of the following three risky portfolios should he hold in combination with a position in the risk-free asset?

A) portfolio with a standard deviation of 16% and an expected return of 12%
B) portfolio with a standard deviation of 20% and an expected return of 16%
C) portfolio with a standard deviation of 30% and an expected return of 20%
D) he should be indifferent in holding any of the three portfolios