If you solve for what fraction of your wealth (y) you should invest in the risky asset and you get the answer of 1.4, what does this mean? Assume you can borrow at the risk free rate. a) That you should invest 100% of your wealth in the risky asset b) That you should invest 140% of your wealth in the risky asset by borrowing at the risk free rate c) That you should short 140% of the risky asset and invest in the risk free asset d) That you should invest somewhere between 100% and 140% of your wealth in the risky asset by borrowing at the risk free rate.
If you solve for what fraction of your wealth (y) you should invest in the risky asset and you get the answer of 1.4, what does this mean? Assume you can borrow at the risk free rate. a) That you should invest 100% of your wealth in the risky asset b) That you should invest 140% of your wealth in the risky asset by borrowing at the risk free rate c) That you should short 140% of the risky asset and invest in the risk free asset d) That you should invest somewhere between 100% and 140% of your wealth in the risky asset by borrowing at the risk free rate.
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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If you solve for what fraction of your wealth (y) you should invest in the risky asset and you get the answer of 1.4, what does this mean? Assume you can borrow at the risk free rate.
a) That you should invest 100% of your wealth in the risky asset
b) That you should invest 140% of your wealth in the risky asset by borrowing at the risk free rate
c) That you should short 140% of the risky asset and invest in the risk free asset
d) That you should invest somewhere between 100% and 140% of your wealth in the risky asset by borrowing at the risk free rate.
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