Suppose you have $400,000 in cash, and you decide to borrow another $64,000 at a 7% interest rate to invest in the stock market. You invest the entire $464,000 in a portfolio J with a 14%

expected return and a 24% volatility.

a. What is the expected return and volatility (standard deviation) of your investment?

b. What is your realized return if J goes up 19% over the year?

c. What return do you realize if J falls by 30% over the year?

AppendixLO1