Question
Suppose you have $100,000 in cash, and you decide to borrow another $15,000 at a 4% interest rate to invest in the stock market. You
Suppose you have $100,000 in cash, and you decide to borrow another $15,000 at a 4% interest rate to invest in the stock market. You invest the entire $115,000 in a
portfolio J with a 15% expected return and a 25% volatility.
a. What is the expected return and volatility (standard deviation) of your
investment?
b. What is your realized return if J goes up 25% over the year?
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Corporate Finance
Authors: Jonathan Berk and Peter DeMarzo
3rd edition
978-0132992473, 132992477, 978-0133097894
