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

question 4

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 20% and a standard deviation of returns of 16%.The risk-free asset has an interest rate of 4%.Calculate the standard deviation of the resulting portfolio.

• A)28%
• B)40%
• C)32%
• D)36%

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Definitions:

Constructive Engagement

A diplomatic policy of engaging with a nation in a positive manner to encourage changes in policies or behavior, often used in contexts of human rights or economic reform.

Economic Sanctions

Financial and trade penalties applied by one or more country against a targeted country, group, or individual to achieve foreign policy objectives.

Berlin Wall

A concrete barrier that physically and ideologically divided Berlin from 1961 to 1989, symbolizing the Cold War division between East and West.

Soviet Domination

Describes the period during which the Soviet Union exerted political, military, and economic control over Eastern Europe, particularly from the end of World War II until the dissolution of the Soviet Union in 1991.