You invest $100 in a portfolio. The portfolio is composed of a risky asset with an expected rate of return of 12% and a standard deviation of 15% and a Treasury bill with a rate of return of 5%. What proportion of your total portfolio should be invested in the risky asset to form a portfolio with an expected rate of return of 9%?
Return for Risky Asset = Rr = 12%
Return on Treasury Bill = Rf = 5%
Let proportion invested in risky asset be wr = x
Proportion invested in Treasury bill = wf = 1 - x
=> Expected Return on Portfolio = wrRr + wfRf
Expected Return required = 9%
=> 9 = 12*x + 5*(1-x)
=> 9 = 12x + 5 - 5x
=> x = (9 - 5)/(12 - 5) = 0.5714 or 57.14%
Hence, 57.14% should be invested in Risky Asset
You invest $100 in a portfolio. The portfolio is composed of a risky asset with an...
You invest $100 in a portfolio. The portfolio is composed of a risky asset with an expected rate of return of 12% and a standard deviation of 15% and a Treasury bill with a rate of return of 5%. What proportion of your total portfolio should be invested in the risky asset to form a portfolio with an expected rate of return of 9%?
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You invest $100 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 12% and a standard deviation of 15% and a treasury bill with a rate of return of 5%. % of your money should be invested in the risk-free asset to form a complete portfolio with an expected rate of return of 9%. Hint: Eſrc)=y.E(rp)+(1-y).rf Your answer must be in two digits with no decimal. Round off your...
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You invest $3,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 20% and a Treasury bill with a rate of return of 10%. __________ of your complete portfolio should be invested in the risky portfolio if you want your complete portfolio to have a standard deviation of 8%. rev: 02_12_2013_QC_26430 17% 5% 37% 40%
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