An Investor Wishes to Construct a Portfolio by Borrowing 30

Multiple Choice

An investor wishes to construct a portfolio by borrowing 30% of his initial wealth at the risk-free rate of 3% and investing all the money in a stock index.The expected return on the stock index is 12%.Calculate the expected return on the portfolio.

A) 14.7%
B) 15.6%
C) 17.1%
D) 18.9%
E) 19.7%