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Suppose you have $100,000 in cash, and you decide to borrow another $25,000 at a 6% interest rate to invest in the stock market. You
Suppose you have $100,000 in cash, and you decide to borrow another $25,000 at a 6% interest rate to invest in the stock market. You invest the entire $125,000 in a portfolio J with a 24% expected return and a 26% volatility.
- What is the expected return and volatility (standard deviation) of your investment?
- What is your realized return if J goes up 13% over the year?
- What return do you realize if J falls by 26% over the year?
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