Question

The portfolio . c and Y expected t poet of $1.00 is composed of the risk-free security and any c ted with two risky series X and Y. The optimal weight of 3 06 701 respectively. Given the risk-freem of X o 10 and has an expected tum of 12% D e cut the expected return for the risky portfolio P. (1points) 2) To for complete portfolio with an expected Num of 8.64 bw much weigh) should you invest in the stree security and the risky portfolio P. spectively (15pints) 3) Figure out the weight for securities X, Y, and the risk-free security, respectively (1 Spoints) Solation with formula, and step by step explanation please

Answer 1

1. Expected return of the portfolio= 11.4%

2. Amount of investment in a risk-free asset = $468.75
Amount of investment in portfolio p = $531.25

3. Weight of X= 30% x 0.53125 = 15.94%
Weight of Y = 70% x 0.53125 = 37.18%
Weight of a risk free asset = 46.88%

to weight of xlwx) = 30% =0.3 weight of 4 (wy) = 70% a 0.7 Return of x ( Rx) = roy. " 4 (Ry): 12%, Expected retuen of portfolio= uxRx+ wyry - 0.3x10+ 0.7x12 - 11.4% 2. Risk free rate (Rp) = 5% weight of Rick free (wF) = wr 1 " Portfolio P(wp) = l-wr 8.4 = wrx 5% + (1-wf) x 11-4% 8.4 Swft 11-4-11-4 WF wrz 0.46875 wp= 0.53 125- Amount of lavestment Risk free = $468-75- Post folep = $53125