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Assume a risk-free rate of 5%, borrowing rate of 6%, risky asset return of 12%, and standard deviation of 20% for the risky asset returns.
Assume a risk-free rate of 5%, borrowing rate of 6%, risky asset return of 12%, and standard deviation of 20% for the risky asset returns. Sketch a graph of the CAL. Label axes. At what level of risk aversion (A), would an investor choose to borrow? Include Explanations.
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