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Suppose that the risk-free rate is 4.5 percent and the expected return on the tangency portfolio of risky assets is 12.5 percent. An investor with $2.5 million to invest wants to achieve a 17.5 percent rate of return on a portfolio combining a risk-free asset and the tangency portfolio of risky assets. Calculate how much this investor would need to borrow at the risk-free rate in order to establish this target expected return.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91600658

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