A financial advisor is offering you a product with an expected return of 21% and a return standard deviation of 32%

Expected return offered by financial advisor = 21%

Risk free rate = 2.7%

Market return = 16.4%

Let the investment in Risk free asset be x

So, Invesment in market will be = 1-x

Since the Optimal portfolio must have same return as offered by the financial advisor so;

Expected return of optimal portfolio = 21%

Expected return of optimal portfolio =  Risk free rate* Investment in Risk free asset + Market return * Invesment in market

Expected return of optimal portfolio = 2.7% * x + 16.4% (1 - x)

21% = 2.7% x + 16.4% - 16.4% x

21% - 16.4% = 2.7% x - 16.4% x

4.6% = -13.7% x

x = 4.6% / (-13.7%)

x = -0.3358

Therefore, Invesment in Risk free asset = -33.58%

Ans: Option d = -33.58%