- Credit Card
- Real Estate
Say we have a market of only 1 stock along and a bank from which we can borrow.
Say the stock has an expected return of 10 % and the bank charges 5 % interest on deposits and loans.
Now I know that the excess return is 5 % on the stock, on average.
But what if I wanted a portfolio that had excess return k5%, where k is some constant that I can multiply with. For example, k = 3, and so I want excess return equal to 15 %.
How do I calculate what I should invest and how much I should borrow, in order to get those 15 % excess rate? (I only have the stock and the bank to work with, no other assets exist)