Question
1. Over the past month, TSLA made 14% and GOOG made 12%. The risk free rate was 1% (EMR). How much would you have today
1. Over the past month, TSLA made 14% and GOOG made 12%. The risk free rate was 1% (EMR). How much would you have today if you had invested the following amounts one month ago? Start by working out the portfolio return.
(a) $2000 in GOOG, $2000 in TSLA
(b) Invest $2000 of your own money in this way: short $2000 in TSLA, $1000 invested in a bank account, the rest in GOOG.
(c) Borrow $5000, and buy $10000 worth of TSLA
(d) Borrow $5000, and buy $10000 worth of GOOG
(e) What are your thoughts about using leverage, i.e., borrowing to make an investment, based on the last two scenarios?
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