Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Suppose you have $275,000 in cash, and you decide to borrow another $33,000 at a 4% interest rate to invest in the stock market. You invest the entire $308,000 in a portfolio J with a 15% expected return and a 22% volatility.
a. What is the expected return and volatility (standard deviation) of your investment?
b. What is your realized return if J goes up 32% over the year?
c. What return do you realize if J falls by 25% over the year?
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