Suppose You Borrow at the Risk-Free Rate an Amount Equal

Multiple Choice

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% and a standard deviation of returns of 20%. The risk-free asset has an interest rate of 4%; calculate the expected return on the resulting portfolio:

A) 20%
B) 32%
C) 28%
D) none of the above