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An fund has a capital of $100M. It's investment opportunity set consists of a risky asset with expected return of 8%, and risk of 16%.
An fund has a capital of $100M. It's investment opportunity set consists of a risky asset with expected return of 8%, and risk of 16%. The fund wishes to achieve an expected return of 12%. The borrowing rate for the fund is 5% and lending rate is 3%. What allocation by the fund will achieve its target of 12% expected return?
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