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Tutorial - Return and Risk
Tutorial - Return and Risk
1
A risk-averse investor versus a risk-
neutral investor: will never take a risk,
while the risk neutral investor will.
3. Consider an investment that pays off $800 or $1,400 per $1,000 invested with equal probability. Suppose you
have $1,000 but are willing to borrow to increase your expected return. What would happen to the expected
value and standard deviation of the investment if you borrowed an additional $1,000 and invested a total of
$2,000? What if you borrowed $2,000 to invest a total of $3,000?
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