1. You have $500,000 available to invest. The risk-free rate, as well as your borrowing rate, is 8%. The return on the risky portfolio is 16%. If you wish to earn a 22% return, you should _________. show calculation
a. invest $125,000 in the risk-free asset
b. invest $375,000 in the risk-free asset
c. borrow $125,000
d. borrow $375,000
2. An investment earns 20% the first year, earns 25% the second year, and loses 22% the third year. The total compound return over the 3 years was ______.
a. 83.00%
b. 17.00%
c. 23.00%
d. 5.67%
show calculation