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Consider risky Funds B and S with the following projections: Fund B S Expected return 6% 10% Standard deviation 2.5% 15% Assume the correlation between Funds B and S is -0.50, and the risk-free rate for a T-bill is 5%. How much of your assets should you invest in Fund S in order to achieve the optimal risky portfolio comprised of Funds B and S? 0% weight in Fund S < 25% 25% weight in Fund S < 50% < 50% weight in Fund S < 75% 75%

Consider risky Funds B and S with the following projections: Fund B S Expected return 6% 10% Standard deviation 2.5% 15% Assume the correlation between Funds B and S is -0.50, and the risk-free rate for a T-bill is 5%. How much of your assets should you invest in Fund S in order to achieve the optimal risky portfolio comprised of Funds B and S? 0% weight in Fund S < 25% 25% weight in Fund S < 50% < 50% weight in Fund S < 75% 75%

Essentials Of Investments
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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Consider risky Funds B and S with the following projections: Fund B S Expected return 6% 10% Standard deviation 2.5% 15% Assume the correlation between Funds B and S is -0.50, and the risk-free rate for a T-bill is 5%. How much of your assets should you invest in Fund S in order to achieve the optimal risky portfolio comprised of Funds B and S? 0% weight in Fund S < 25% 25% weight in Fund S < 50% < 50% weight in Fund S < 75% 75% <weight in Fund S
Transcribed Image Text:Consider risky Funds B and S with the following projections: Fund B S Expected return 6% 10% Standard deviation 2.5% 15% Assume the correlation between Funds B and S is -0.50, and the risk-free rate for a T-bill is 5%. How much of your assets should you invest in Fund S in order to achieve the optimal risky portfolio comprised of Funds B and S? 0% weight in Fund S < 25% 25% weight in Fund S < 50% < 50% weight in Fund S < 75% 75% <weight in Fund S
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