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Suppose you borrow at the risk-free rate an amount equal to your initial wealth and invest in a portfolio with an expected return of 20%

Suppose you borrow at the risk-free rate an amount equal to your initial wealth and invest in a portfolio with an expected return of 20% and a standard deviation of returns of 16%. The risk-free asset has an interest rate of 4%; calculate the expected return on the resulting portfolio ______. (Points: 5)

20%

40%

36%

none of the above

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