Diane has $2,500 to invest. The expected return on the market portfolio is 11% with a standard
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Diane has $2,500 to invest. The expected return on the market portfolio is 11% with a standard deviation of 15%. What are the expected return and standard deviation for the portfolio if Diane borrows an additional $1,000 at the risk free rate of 4% and invests everything in the market portfolio.
a) Expected return = 19.40% ; standard deviation = 15.40%
b) Expected return = 15.40% ; standard deviation = 19.40%
c) Expected return = 13.80% ; standard deviation = 21.00%
d) Expected return = 21.00% ; standard deviation = 13.80%
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