Question

(please fast!!)

You have $100,000 to invest in a portfolio containing Stock A and a risk-free asset (T-bill). Stock A has an expected return of 13 percent and a beta of 1.5. Whereas, the risk-free asset has an expected return of 4 percent.

1. If you plan to create a portfolio that is as equally as risky as the market, the $ amount that you will need to allocate to the risk free asset within this portfolio is   _______ .

Answer 1

rate of return of the share	13%
risk free rate	4%
beta	1.5
market rate	4%+(1.5*(r-4%))=13%
	1.5P-0.06 =9%
	1.5p=.15
	p=0.15/1.5
market rate of security	10%
investment in the risk free security is w and risky security is (1-w)
=w*4%+(1-w%)*13%	10%
=4%w+13%-13%w	10%
9%w=	3%
weightage of riks free security	33.33%
please Like ? the answer, Please comment if any query…………………………………………………………………………………….