Assume that the capital market is in equilibrium, the risk free rate is 2%, and the return on the market is 12%. You want to construct a portfolio on the SML with an expected return of 16%. What are the portfolio weights?
A) -0.4, 1.4
B) -0.1, 1.1
C) 0.2, 0.8
D) 0.4, 0.6
E) 0.4, -1.4
A
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