Question
Mr. Wannabe Rich has just inherited $ 1000,000. He could either invest his money in the bank which gives a return of 4% or invest
Mr. Wannabe Rich has just inherited $ 1000,000.
He could either invest his money in the bank which gives a return of 4% or invest in shares of Monopoly Corp which is the only company in the market.
Shares of Monopoly Corp offer a mean return of 12% and a risk of 10%.
Mr. Rich decides to invest in a portfolio with a risk of 15%
Unfortunately, when the fund manager has worked out the weights of the portfolio needed to achieve this, her new intern interchanges the weights for shares and the bank and invests accordingly.
What is the expected return that Mr Rich will get?
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