Suppose You Borrow at the Risk-Free Rate an Amount Equal

question 8

Multiple Choice

Suppose you borrow at the risk-free rate an amount equal to your initial wealth and invest in a portfolio with an expected return of 16% and a standard deviation of returns of 20%.The risk-free asset has an interest rate of 4%.Calculate the expected return on the resulting portfolio.

• A)20%
• B)32%
• C)28%
• D)12%