An Investor Wishes to Construct a Portfolio by Borrowing 35

Multiple Choice

An investor wishes to construct a portfolio by borrowing 35 percent of his original wealth and investing all the money in a stock index. The return on the risk-free asset is 4.0 percent, and the expected return on the stock index is 15 percent. Calculate the expected return on the portfolio.

A) 18.25 percent
B) 18.85 percent
C) 9.50 percent
D) 15.00 percent
E) 11.15 percent