You are considering investing $1,100 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 4% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40% respectively. X has an expected rate of return of 15%, and Y has an expected rate of return of 10%. To form a complete portfolio with an expected rate of return of 7%, you should invest approximately __________ in the risky portfolio. This will mean you will also invest approximately __________ and __________ of your complete portfolio in security X and Y, respectively.
You are considering investing $1,100 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 4% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40% respectively. X has an expected rate of return of 15%, and Y has an expected rate of return of 10%. To form a complete portfolio with an expected rate of return of 7%, you should invest approximately __________ in the risky portfolio. This will mean you will also invest approximately __________ and __________ of your complete portfolio in security X and Y, respectively.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 5P
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You are considering investing $1,100 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 4% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40% respectively. X has an expected
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