Question
Consider an investment that pays off $300 or $1,100 per $1,000 invested with equal probability. Suppose you have $1,000 but are willing to borrow to
Consider an investment that pays off $300 or $1,100 per $1,000 invested with equal probability. Suppose you have $1,000 but are willing to borrow to increase your expected return. What would happen to the expected value and standard deviation of the investment if you borrowed an additional $1,000 and invested a total of $2,000? What if you borrowed $2,000 to invest a total of $3,000? Instructions: Complete the table below to answer the questions above. Enter your answers as whole numbers and enter percentages to the nearest decimal place. Enter a negative sign (-) to indicate a negative number if necessary.
| Expected Value | Percentage | Standard Deviation | Expected Return |
Invest $1,000 | $ | % |
| N/A |
Invest $2,000 | $ | % |
| (Click to select)N/AQuadrupledDoubledRemained the same |
Invest $3,000 | $ | % |
| (Click to select)N/ARemained the sameTripledDoubled
|
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