Explore BrainMass
Share

Explore BrainMass

    Expected Return

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    If the market has an expected return of 10%, a standard deviation of 20% and the risk-free rate is 4%, what proportion of your money should be invested in the market if you want an expected return of 16%?

    A. 75%
    B. 160%
    C. 200%
    D. It is impossible to get an expected return of 16% in this situation

    © BrainMass Inc. brainmass.com October 10, 2019, 12:53 am ad1c9bdddf
    https://brainmass.com/economics/income-distribution/calculating-expected-return-example-problem-311699

    Solution Preview

    Since the market has a return of only 10% and we need 16% return, we would need to borrow at risk free rate of 4%. ...

    Solution Summary

    The solution explains how to calculate the proportion to be invested to get a desired expected return.

    $2.19