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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 16%
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 16% and a standard deviation of returns of 20%. The risk-free asset has an interest rate of 4%. Calculate the expected return on the resulting portfolio. Answer is 28.
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