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What Return Should Be Expected from Investing in the Market

question 9

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What return should be expected from investing in the market portfolio which is expected to yield 18% if the investment includes all of the investor's funds plus 100% of additional funds borrowed at the risk-free rate of 6%?


Definitions:

Ratio

A numerical ratio representing how often one number can be divided by another, showing either how many times one is included in the other or vice versa.

Partnership Interest

Ownership share or participation in a partnership that usually entitles the holder to a proportion of the partnership's profits and assets.

Capital Contributions

The funds or assets initially invested in a business or partnership by its owners or partners.

Ratio

A relationship in numbers expressing the frequency with which one value encompasses or is encompassed by another.

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