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%

---

Definitions:

Sensory Adaptation

The process by which sensory receptors become less sensitive to constant stimuli over time.

Visual Impulses

Visual impulses are electrical signals generated by the retina in response to light, transmitted through the optic nerve to the brain, where they are interpreted as vision.

Eyestrain

Discomfort or strain on the eyes, typically resulting from prolonged computer use, reading without proper light, or any activity that requires intense focus.

Cones

Photoreceptor cells in the retina that enable color vision and visual clarity in bright light.