From 1980 to 2020, the average return on the SP500 total return index is around 10%, and the risk-free rate is 2%. The volatility of the SP500 total return index is 16%. If you borrow at the risk-free rate and lever up your position on the SP500 to 3 times your wealth, what's the expected return, volatility, and Sharpe ratio of your position?

Answer rating: 100% (QA)

To calculate the expected return of the leveraged position we first need to calculate the expec... View the full answer