![215 points] If Rm = 9% and Rf = 4%, what should be the fraction of your wealth that you should invest in the risk-free asset if you want a return of 7.7 Show how you get the answer. 5% on your diversified portfolio?](http://img.homeworklib.com/questions/e354cb50-8305-11eb-afa5-2530fb077751.png?x-oss-process=image/resize,w_560)
Homework Answers
Weight in the risk free asset be w
Weight in the market asset be (1 - w)
4 x w + 9 x (1 - w) = 7.75
4w + 9 - 9w = 7.75
5w = 1.25
w = 0.25 or 25%
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