Consider a borrow-and-invest strategy in which you use $1 million of your own money and borrow another $1 million (at the t-bill rate) to invest $2 million in a market index fund. If the risk free interest rate is 4.60 percent and the expected rate of return on the market index fund is 12.53 percent, what is the risk premium on this borrow-and-invest strategy?

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The risk premium on this borrowandinvest strategy would be the differenc... View the full answer