8. You currently have 50% of your wealth in a risk free asset and 50% in the four assets below: EXPECTED RETURN Asset i (%) Percentage Invested in Asset i (%) 7.6 10 12.4 10 Asset 1-1 1-2 1-3 i-4 10 20 15.6 18.8 If you want an expected rate of return of 12% you can obtain it by selling some of your holding of the risk free asset and using the proceeds to buy the equally weighted market portfolio. If this is the way you decide to revise your portfolio, what will the set of weights in your portfolio be? If you hold only the risk free asset and the market portfolio, what set of weights would give you an expected 20% return?
8. You currently have 50% of your wealth in a risk free asset and 50% in the four assets below: EXPECTED RETURN Asset i (%) Percentage Invested in Asset i (%) 7.6 10 12.4 10 Asset 1-1 1-2 1-3 i-4 10 20 15.6 18.8 If you want an expected rate of return of 12% you can obtain it by selling some of your holding of the risk free asset and using the proceeds to buy the equally weighted market portfolio. If this is the way you decide to revise your portfolio, what will the set of weights in your portfolio be? If you hold only the risk free asset and the market portfolio, what set of weights would give you an expected 20% return?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Risk free rate is not GIVEN.
Transcribed Image Text:8. You currently have 50% of your wealth in a risk free asset and 50% in the four assets below:
EXPECTED RETURN
Asset i (%)
7.6
12.4
15.6
18.8
If you want an expected rate of return of 12% you can obtain it by selling some of your
holding of the risk free asset and using the proceeds to buy the equally weighted market
portfolio. If this is the way you decide to revise your portfolio, what will the set of weights in
your portfolio be? If you hold only the risk free asset and the market portfolio, what set of
weights would give you an expected 20% return?
Asset
i=1
i = 2
1 = 3
1 = 4
Percentage Invested in
Asset i (%)
10
10
10
20
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