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

Question 8

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) 12%

Correct Answer:

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