At the beginning of 2016, you invested $20,000 in Jersey Mike's Corporation (JMC), trading at $20 per share. JMC earned a return of 14% in 2016, 20% in 2017, -8% in 2018. Assume the risk-free rate is 3% per year. You can treat this risk-free asset as an asset with a constant rate of return. What was the cumulative return from the start of 2018 to the end of 2018 if you had formed the following portfolios:
A. Buy 500 shares of JMC, invest the remainder in the risk-free asset.
B. Buy 2,000 shares of JMC on margin, borrowing at the risk-free rate. (Hint: When you borrow from the risk-free asset, its weight in your portfolio should be negative.)
C. Short-sell 1,000 shares of JMC, invest the remainder in the risk free asset.
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