The Explosive Bull Plus Fund seeks daily investment results that correspond to two times (200%)the daily performance of the S&P 500 Index.The expected return on the S&P index is 6%,and the expected return on T-Bills (the risk-free rate)is 2%.If you wanted to build a portfolio out of T-Bills and the S&P index to mimic the performance of the Fund,then what are the portfolio weights of each asset? A) w_S&P = 1 and w_T-Bill = 0 B) w_S&P = 1.5 and w_T-Bill = -0.5 C) w_S&P = 1.8 and w_T-Bill = -0.8 D) w_S&P = 2.5 and w_T-Bill = -1.5 E) w_S&P = 2.67 and w_T-Bill = -1.67

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The expected return on the Explosive Bull Plus Fund is equal to twice the expected return on the market portfolio. Let E(k) be the expected return on the Explosive Bull Plus Fund: E(k) = 2 × E( 11ea7fdb_fc0e_91c0_a768_e1ed18de2f10_TB2902_11 ) E(k) = 2 × 0.06 = 0.12 or 12% We know that the expected return on the portfolio, which we found must be 12%, is the sum of each individual security's expected return multiplied by its portfolio weight. Let w be the weight of the T-Bill: E(k) = w(k_F) + (1 - w)(E(k_M)) 0.12 = (w × 0.02) + (1 - w)(0.06) 0.12 = 0.02w + 0.06 - 0.06w 0.06 = -0.04w w = -1.5 The weight of the market = 1 - (-1.5) = 2.5

The Explosive Bull Plus Fund Seeks Daily Investment Results That