Ash Ketchum has been hired as a financial advisor for Professor Oak. He has to invest $50,000 in a portfolio of two assets. One asset is a safe asset with a fixed return of 10%. The other asset is risky, it has a 35% expected rate of return, but the standard deviation of this return is 15%. Professor Oak wants as high a rate of return as possible while keeping the standard deviation at or below 7%. How much of Professor Oak's money should Ash invest in the safe asset?

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
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Ash Ketchum has been hired as a financial advisor for Professor Oak. He has to invest $50,000 in a portfolio of two assets. One asset is a safe asset with a fixed return of 10%. The other asset is risky, it has a 35% expected rate of return, but the standard deviation of this return is 15%. Professor Oak wants as high a rate of return as possible while keeping the standard deviation at or below 7%. How much of Professor Oak's money should Ash invest in the safe asset? 

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