In a World Where Riskless Borrowing or Lending Is Possible

question 2

Multiple Choice

In a world where riskless borrowing or lending is possible at 6%, if the expected return to the optimal risky asset portfolio is 12%, and you want a target return of 15%, what must you do?

• A) Borrow an amount equal to 25% of your wealth and put 125% of your wealth in the risky portfolio.
• B) Borrow an amount equal to 50% of your wealth and put 150% of your wealth in the risky portfolio.
• C) Invest half your wealth in the risky portfolio and the other half in bonds.
• D) Invest 75% of your wealth in risky assets and 25% in bonds.

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Definitions:

Management

The process of planning, organizing, leading, and controlling resources within an organization to achieve its goals efficiently and effectively.

Organizational Setting

The physical and social environment in which an organization operates, including its culture, structure, and external environment.

Educational Process

The systematic series of steps or actions involved in acquiring knowledge or skills through study, experience, or teaching.