Let's first find out the composite return of the risky portfolio
= 60%*13%+ 40%*10%
= 11.8%
Return of treasury bill = 4%
We want to have a total return of complete portfolio as 7%
Let's assume that investment in treasury bill is x. The total portfolio is 100%.
Hence investment in risky portfolio would be 100%-x
The equation comes out as follows
x* 4% + (100%-x)*11.8% = 7%
To solve for x, refer the attached photo.
Which gives us x = 61.54%
Therefore, you should invest approximately (100%-x) i.e. 38% in the risky portfolio. This means you would also invest approximately 38%* 60% and 38%*40% i.e. 23% and 15% of your complete portfolio in security x and y respectively.
Hence, option C is the correct option.
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