In the CFAI material (Study Session 12, Reading 51, page 258), it says if you borrow 50% of your original wealth at the Risk Free Rate, your expected return becomes: E® = -0.50 RFR + 1.5 E(Rm) Shouldn’t this be E® = -0.33 RFR + 1.5 E(Rm) ? I checked the errata and it didn’t include it for correction. Comments?
Never mind, this should have been posted on the L1 forum. It also looks ok, I just got confused on whether the borrowed money is 50% or 33% of the portfolio. It is 33% of the new portfolio, and 50% of the old (before borrowing) portfolio.