Suppose You Have $10,000 in Cash and You Decide to Borrow

question 16

Multiple Choice

Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a(n) 6% interest rate to invest in the stock market. You invest the entire $20,000 in an exchange-traded fund (ETF) with a 10% expected return and a 20% volatility. Assume that the ETF you invested in returns -10%. Then the realized return on your investment is closest to ________.

• A) -18%
• B) -10%
• C) -23%
• D) -26%

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