Assume that tangent portfolio T has an expected return of 14%, with a standard deviation of 20%, and that the risk-free rate is 3%.
You choose to invest a total of $1,000. $350 is invested in portfolio T and $650 in the risk-free asset. What are the expected return and standard deviation of your portfolio?
Suppose you borrow $200 at the risk-free rate. Combining this with your original sum of $1,000, you invest a total of $1,200 in the risky asset. What are the expected return and standard deviation of your portfolio?