An Investor Wishes to Construct a Portfolio by Borrowing 30

question 138

Multiple Choice

An investor wishes to construct a portfolio by borrowing 30 percent of his initial wealth at the risk-free rate of 3 percent and investing all the money in a stock index. The expected return on the stock index is 12 percent. Calculate the expected return on the portfolio.

• A) 14.7 percent
• B) 15.6 percent
• C) 17.1 percent
• D) 18.9 percent
• E) 19.7 percent

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Definitions:

Fructose

A simple sugar found in many plants and fruits, often used as a sweetener in food and beverages due to its high sweetness relative to glucose.

Epididymis

Location of sperm maturation in an adult human male; located in the testis.

Vas Deferens

Also called the ductus deferens; storage location for mature sperm before they pass into the ejaculatory duct.

Seminal Vesicles

Glands in male humans that secrete a viscous fluid that provides nutrition to the sperm cells.