There are two risky assets; their expected returns are 10% and 8%, and their volatilities are 20% and 10%. The correlation between the two assets is zero. The risk-free rate is 2%. Assume that you are considering investing $10,000 into the three assets (two risky and one risk-free), and you have decided that $4,000 should be invested into the risk-free asset (the remaining goes to the risky ones). If you are a mean-variance efficient investor, how much money will you invest in asset 1 (the one with a 10% expected return and a 20% volatility)? answers: $1500 $4800 $6000 $2400

There are two risky assets; their expected returns are 10% and 8%, and their volatilities are 20% and 10%. The correlation between the two assets is zero. The risk-free rate is 2%. Assume that you are considering investing $10,000 into the three assets (two risky and one risk-free), and you have decided that $4,000 should be invested into the risk-free asset (the remaining goes to the risky ones). If you are a mean-variance efficient investor, how much money will you invest in asset 1 (the one with a 10% expected return and a 20% volatility)? answers: $1500 $4800 $6000 $2400

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 18P

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