A portfolio consists of one risky asset and one risk-free asset.The risky asset has an expected return of 11.2 percent and a beta of 1.39.The risk-free asset has an expected return of 3.4 percent.How much of the portfolio is invested in the risk-free asset if the portfolio beta is 1.07?
A) 16 percent
B) 23 percent
C) 32 percent
D) 45 percent
E) 54 percent

Question

Quizplus · Accepted Answer

1.06 = 1.39X_A + 0; X_A = .77; X_rf = 1 - .77 = 23 percent

A Portfolio Consists of One Risky Asset and One Risk-Free