Question

QUESTION 4 0.2 You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 596 and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40%, respectively. X has an expected rate of return of 149%, and Y has an expected rate of return of 10%. If you decide to hold 25% of your complete portfolio in the risky portfolio and 759% in the Treasury bills, then the dollar values of your positions in X and Y respectively, would be and $300; $450 $150; $100 $100; $150 $450; $300

Answer 1

The dollar values of the position is computed as shown below:

Total amount invested in the risky securities is computed as follows:

= $ 1,000 x 25%

= $ 250

So the amount allocated between X and Y will be

Amount allocated in security X will be:

= $ 250 x 60%

= $ 150

Amount allocated in security Y will be:

= $ 250 x 40%

= $ 100

So the correct answer is option of $ 150, $ 100

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