You invest $100 in a portfolio. The portfolio is composed of a risky asset with an...

Question

Question

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%?

Answer 1

Answer #1

Weight of risky asset=25%/20%=1.25
Expected return=1.25*15%+(1-1.25)*10%=16.25000%

Answer 2

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