Suppose you have $100,000 in cash, and you decide to borrow another $25,000 at a 6% interest

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Suppose you have $100,000 in cash, and you decide to borrow another $25,000 at a 6% interest rate to invest in the stock market. You invest the entire $125,000 in a portfolio J with a 24% expected return and a 26% volatility.

a. What is the expected return and volatility (standard deviation) of your investment?

b. What is your realized return if J goes up 13% over the year?

c. What return do you realize if J falls by 26% over the year?

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Corporate Finance The Core

ISBN: 9781292158334

4th Global Edition

Authors: Jonathan Berk, Peter DeMarzo

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Question Posted: Feb 29, 2024 04:01 AM

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Suppose you have $100,000 in cash, and you decide to borrow another $25,000 at a 6% interest

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a To calculate the expected return and volatility of the investment we first need to calculate the w...View the full answer

Corporate Finance The Core

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