Question

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 answer to have no decimal. That is, you answer must be in this format: xx

Answer 1

E(rc) =12%
E(Rf)=5%
Expected  Return =y.E(rc)+(1-y)*E(Rf)
9% =y*12%+(1-y)*5%
9%-5% =y*(12%-5%)
y =4%/7% =57%
Percentage of money spent in risk free asset =1-y =1-57%=43%