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The current portfolio is a little towards left than the TAA portfolio. So, the risk of TAA is higher than the company’s risk tolerance. Therefore, TAA is not an efficient portfolio.
When we draw a tangent to both policy and TAA portfolio, the slope of the policy portfolio will be higher than TAA portfolio, which means the Sharpe ratio of policy portfolio is much higher than that of TAA portfolio.
As per my level 2 knowledge when we add cash or leverage to the portfolio we have the same Sharpe ratio. All the portfolios which is constructed by giving weights to rf and tangency portfolio(i.e. portfolios standing in the line which is starting from rf and is a tangent to the efficient frontier) should have the same Sharpe ratio.
Your answer and option C is not matching.