Question: Suppose you have INR 1,00,000 in cash, and you decide to borrow another INR 50,000 at 8% p,a, to invest in stock market. You invest

Suppose you have INR 1,00,000 in cash, and you decide to borrow another INR 50,000 at 8% p,a, to invest in stock market. You invest the entire 1,50,000 in a portfolio with expected return of 15% p.a. and annual volatility (standard deviation) of 25%.

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

(b)What is your realized return if the portfolio goes up by 25%?

(c)What is you realized return if the portfolio falls by 25%?

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