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Now suppose you have invested all your capital ($150,000) in TSLA stock only. You know the characteristics of TSLA , expected return 39% and volatility

Now suppose you have invested all your capital ($150,000) in TSLA stock only. You know the characteristics of TSLA , expected return 39% and volatility is 58%.

You know also that the market portfolio has an expected return of 15% and a volatility of 19.8%. Assume that the risk-free interest rate is 2%.

Under the CAPM assumptions:

i. How much you should borrow to create an investment with the lowest possible volatility while having the same expected return as TSLA? (6 marks)

ii. What would be the volatility of this new investment? (4 marks)

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