Question
Consider an investment that pays off $700 or $1,600 per $1,000 invested with equal probability. Suppose you have $1,000 but are willing to borrow to
Consider an investment that pays off $700 or $1,600 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: Fill in the table below to answer the questions above. Enter your responses as whole numbers and enter percentage values as percentages not decimals (i.e., 20% not 0.20). Enter a negative sign (-) to indicate a negative number if necessary.
Expected Value | Percent Increase | Standard Deviation | Expected Return | |
Invest $1,000 | $ | % | N/A | |
Invest $2,000 | $ | % |
Invest $3,000 | $ | % |
rev: 10_04_2017_QC_CS-103827, 06_09_2018_QC_CS-119736
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