Question: 3. What is the expected return and risk if you decide to borrow 100% from the bank and invest in the Sharpe Ratio Portfolio with

3. What is the expected return and risk if you decide to borrow 100% from the bank and invest in the Sharpe Ratio Portfolio with a 200% weight. The bank will loan you money at 7% interest. Hint: Conceptually, if you have $1mm, you borrow $1mm from the bank. Now you can invest $2mm. A $2mm investment is 200% of your equity ($1mm). 1yr from now, you would owe the bank $70m ( 7% interest) on the loan they gave you. Structurally you are investing in the Sharpe Ratio portfolio with a 200% weight and the constant 7% loan rate with a 100% weight. The weights always add up to 100%

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1. Which position would you take?

4. Is your choice different from that which you would recommend to Laura?

3. How does this fit with your preferences, career anchors, and values?