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.
How many times is the range (range of return) of the lever portfolio larger than the range of unlevered portfolio?
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Personal Financial Planning
Authors: Lawrence J. Gitman, Michael D. Joehnk
11th Edition
0324422865, 978-0324422863
