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Suppose that the risk-free rate is 3 percent and the expected return on the tangency portfolio of risky assets is 9.5 percent. An investor with
Suppose that the risk-free rate is 3 percent and the expected return on the tangency portfolio of risky assets is 9.5 percent. An investor with $1 million to invest wants to achieve a 11.5 percent rate of return on a portfolio combining a risk-free asset and the tangency portfolio of risky assets. Calculate how much this investor would need to borrow at the risk-free rate in order to establish this target expected return.
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