Suppose you borrow at the risk-free rate an amount equal to your initial wealth and invest in a portfolio with an expected return of 16 percent and a standard deviation of returns of 20 percent. The risk-free asset has an interest rate of 4 percent. Calculate the expected return of the resulting portfolio. A 12 percent B 28 percent 20 percent D 32 percent

Algebra & Trigonometry with Analytic Geometry
13th Edition
ISBN:9781133382119
Author:Swokowski
Publisher:Swokowski
Chapter2: Equations And Inequalities
Section2.1: Equations
Problem 70E
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Suppose you borrow at the risk-free rate an amount equal to your initial wealth and invest in a portfolio with an expected return of
16 percent and a standard deviation of returns of 20 percent. The risk-free asset has an interest rate of 4 percent. Calculate the
expected return of the resulting portfolio.
A 12 percent
B 28 percent
20 percent
D 32 percent
Transcribed Image Text:Suppose you borrow at the risk-free rate an amount equal to your initial wealth and invest in a portfolio with an expected return of 16 percent and a standard deviation of returns of 20 percent. The risk-free asset has an interest rate of 4 percent. Calculate the expected return of the resulting portfolio. A 12 percent B 28 percent 20 percent D 32 percent
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