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%?
D. It is impossible to get an expected return of 16% in this situation
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%. ...
The solution explains how to calculate the proportion to be invested to get a desired expected return.