An Investor Wishes to Construct a Portfolio by Borrowing 35

question 87

Multiple Choice

An investor wishes to construct a portfolio by borrowing 35% of his original wealth and investing all the money in a stock index.The return on the risk-free asset is 4.0% and the expected return on the stock index is 15%.Calculate the expected return on the portfolio.

• A) 18.25%
• B) 18.85%
• C) 9.50%
• D) 15.00%
• E) 11.15%

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Definitions:

Foot

A unit of measurement equal to 12 inches or 0.3048 meters, commonly used in the United States for length.

Axial Skeleton

The part of the skeleton that includes the bones of the head and trunk, such as the skull, spine, and rib cage.

Cranium

The part of the skull which encloses the brain, consisting of the frontal, parietal, temporal, occipital, sphenoid, and ethmoid bones.

Hyaline Cartilage

A type of tough, elastic cartilage that provides cushioning and support for body structures such as the ribs, nose, and trachea.