You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% 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 14%, 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 75% in the Treasury bills, then the dollar values of your positions in X and Y, respectively, would be ________ and ________.
A) $300; $450
B) $150; $100
C) $100; $150
D) $450; $300

Question

Quizplus · Accepted Answer

X = 1,000(.25)(.6) = 150
Y = 1,000(.25)(.4) = 100

You Are Considering Investing $1,000 in a Complete Portfolio