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Capital markets in Flatland exhibit trade in four securities, the stocks X, Y, and Z, and...

  1. Capital markets in Flatland exhibit trade in four securities, the stocks X, Y, and Z, and a riskless government security. Evaluated at current prices in U.S. dollars, the total market values of these assets are, respectively, $24 billion, $36 billion, $24 billion, and $16 billion. (6 pts.)
    1. Determine the relative proportions of each asset in the market portfolio.
    2. If an investor holds risky assets in proportion to their market values and divides their aggregate portfolio of $100,000 with $30,000 invested in the riskless asset, how much is invested in securities X, Y, and Z?
  2. Suppose the risk-free rate is 0.10 and a security with a beta of +1 has an equilibrium expected rate of return of 0.15. What is the equity market premium? (1 pts.)
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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

JUST WRITTEN IN EXCEL, NO EXCEL FUNCTION IS USED

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