The expected return on the market portfolio is 11%, and you can borrow money at a...
The expected return on the market portfolio is 11%, and you can borrow money at a rate of 5.1%. Construct a $100,000 portfolio of the market portfolio and borrowed money that produces an expected return of 14.835%. (Rounded to the nearest dollar.)
Homework Answers
assume invest in market portfolio %=M
M*11%+(1-M)*5.1%=14.835%
M*5.9%+5.1%=14.835%
M=(14.835%-5.1%)/5.9%
=165%
invest in market portfolio=100000*165%=165000
borrow=100000*(100%-165%)=-65000
the above is answer..
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