In a portfolio consisting of the risk free asset and/or a risky asset, what is the...

In a portfolio consisting of the risk free asset and/or a risky asset, what is the expected return and standard deviation if you borrow 25% of your net worth by selling short the risk free asset and invest the proceeds in the risky asset, given the following? Rm = .15 Rf = .05 σm = .2

Expert Solution

Net worth=100
Borrowing=25
Investment in risky asset=125

Expected return=1.25*0.15-0.25*0.05=0.18

Standard deviation=1.25*0.2=0.25

jeff jeffy answered 2 years ago

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