Question

You invest $100 partly in a risky asset with an expected rate of return of 11% and a standard deviation of 21% and partly in T-bills with a yield of 4.5%. What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 8.0%?

Answer #1

Standard deviation of risky asset and correlation of its return with risky asset are zero.

This means, the second and third term in the equation are 0.

0.08 = w * 0.21

**w = 38.10%** --> Weight of Risky Asset

Weight of risk free asset = 1 - 38.10% =
**61.90%**

ou invest $1,000 in a risky asset with an expected rate of
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What percentages of your money must be invested in the risky asset
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expected return of 0.11?
Select one:
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b. 75% and 25%
c. 62.5% and 37.5%
d. 46.2% and 53.8%
e. Cannot be determined.

You invest $10,000 in a complete portfolio. The complete
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What is the standard deviation (%) of Fred’s
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