FB 
AMZN 

Expected Return 
8.74% 
6.09% 
Standard Deviation 
11.62% 
9.01% 
The covariance between FB and AMZN is 0.0034. Suppose that you invest 75% in AMZN and 25% in FB to form the optimal risky portfolio. Then you combine the optimal risky portfolio with one riskfree asset (the riskfree rate is 1%) to form the optimal complete portfolio. How much should you invest in the riskfree asset if your risk aversion index is A=5? What is the weight of AMZN in your optimal complete portfolio? Here assume that you can borrow at 1% as well.
114.67%; 75% 

125.40%; 169.05% 

14.67%; 86% 

180.49%; 210.37% 
Given,
risk aversion of the investor (A) = 5
standard deviation of portfolio (Sd) = 5.87%
Weight in the stock (W) = ?
Stock Return(Rm) = 7.16%
Risk free rate (Rf)= 1%
weight of the risky portfolio formula:
W = (Rm  Rf)/A*Sd^2
W = (7.16  1)/0.05*(5.87%)^2
W= 357%
The amount to be invested in Amazon is 357*0.594
=212%
Answer is 180.49%; 210.37%
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