An Investor Wishes to Construct a Portfolio by Borrowing 30

question 66

Multiple Choice

An investor wishes to construct a portfolio by borrowing 30% of his initial wealth at the risk-free rate of 3% and investing all the money in a stock index.The expected return on the stock index is 12%.Calculate the expected return on the portfolio.

• A) 14.7%
• B) 15.6%
• C) 17.1%
• D) 18.9%
• E) 19.7%

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Definitions:

Epithelial Tissue

A type of body tissue that lines the cavities and surfaces of structures throughout the body, playing roles in protection, secretion, and absorption.

Epithelial Tissue

A type of tissue that lines the outer surfaces of organs and blood vessels, as well as the inner surfaces of cavities in many internal organs.

Secretion

The process by which substances are produced and discharged from cells or glands for a particular function in the organism or for excretion.

Absorption

The process by which substances are taken up into or across tissues, such as nutrients being absorbed through the gastrointestinal tract into the bloodstream.