Question

You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. What would be the dollar value of your positions in X, Y, and the T-bills, respectively, if you decide to hold a portfolio that has an expected outcome of $1,120?

Group of answer choices

a)$108; $514; $378

b)$568; $54; $378

c)$568; $378; $54

d)Cannot be determined.

e)$378; $54; $568

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

De Bano 0509 VO (dx ENG 201 2020 54 DN258 - XVfx DI DJ DK DM DN DO DP DQDR DS D' 257 RETURN ON X = RETURN ON Y = RETURN ON T BILL = 14% 10% 5% RISKY PORTFOLIO = P INVESTMENT IN X = 60%, Y = 40% SO PORTFOLIO RETURN = SUM OF (WEIGHT X RETURN) PORTFOLIO RETURN = 60% X 14% + 40% X 10% = 12.40% 269 270 TOTAL EXPECTED OUTCOME = 1120 THAT IS RETURN = 1120-1000 = 120 RETURN ON TOTAL INVESTMENT = 120/1000 = 12% RETURN ON TOTAL INVESTMENT = WEIGHT OF T BILL X RETURN ON TBILL + WEIGHT OF "P" X RETURN ON "P" 277 278 279 12% = (5%) + (1-W)(12.4%) WE WEIGHT OF T BILL, 1-W = WEIGHT OF "P" 12% = W(5%) + 12.4% -(W)(12.4%) 0.4% = 7.4%(w) W = 0.05405 =5.4% = INVESTMENT IN T BILL 1-W = 0.946 = 94.6% = INVESTMENT IN "P" 280 281 282 KE CAPM UTILITY, SHARPE, beld CoNvexily DGM beta por lulure INDEX INTL CAP BUD SANDRINE LEASING PV, FV, ANNUITY DIR right clean YIELD tond portfolio WACC ... :

De Bano Qv a d 0509 ENG 2201 2020 E24 UN 305 x for DI D DK DN DO D P DQ DR DS D' 280 281 DM W = 0.05405 =5.4% = INVESTMENT IN T BILL 1-W = 0.946 = 94.6% = INVESTMENT IN "P" 284 285 286 INVESTMENT IN T BILL = 1000 X 5.4% = INVESTMENT IN "P" = 1000 X 94.6% = INVESTMENT IN X = 60% X 946 = INVESTMENT IN Y = 40% X 946 = 54 946 568 378 ANSWER:C:: 568, 378,54 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 KE CAPM UTILITY, SHARPE, bela convexily DGM beta porl lulure INDEX INTL CAP BUD SANDRINE LEASING PV, FV. ANNUITY DIR right clean YIELD bond portfolio WACC ... D