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:

Radial Pulse

The pulse felt at the wrist where the radial artery runs, used to measure heart rate and rhythm.

Apical Pulse

The heart rate as measured at the apex of the heart, typically through auscultation with a stethoscope, reflective of the actual heartbeat.

Pulse Deficit

The difference between the heart rate measured at the apex of the heart and the rate measured at the wrist or other peripheral site, indicating a discrepancy in the heart's efficiency.

Thermometer Probe

A device used to measure temperature, often inserted into a substance or location, such as food or an environmental area, for accurate readings.