You invest $1000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04.
-What percentages of your money must be invested in the risky asset and the risk-free asset,respectively,to form a portfolio with an expected return of 0.11?
A)53.8% and 46.2%
B)75% and 25%
C)62.5% and 37.5%
D)46.2% and 53.8%
E)Cannot be determined.

Question

Quizplus · Accepted Answer

To achieve an expected portfolio return of 0.11, use the formula: 0.11 = x(0.17) + (1-x)(0.04). Solving for x gives x = 0.538, meaning 53.8% in the risky asset and 46.2% in the risk-free asset.

You Invest $1000 in a Risky Asset with an Expected