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

question 22

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

• A)28 percent
• B)40 percent
• C)32 percent
• D)36 percent

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Definitions:

Bonus Plan

A rewards program offered by employers which provides employees with extra payment or incentives based on performance criteria.

Computer Units Sold

The quantity or number of computer units that have been purchased by customers over a specified period.

Population of Differences

Refers to the variation or differences found within a specified group or dataset.

Daily Attendance

The count or record of individuals present in a particular setting or event each day.