QUESTION 12 Investors can form complete portfolios out of a risk-free asset and a risky portfolio. The risky portfolio can be formed out of 2 risky stocks: AAPL with an expected return of 10% and volatility of 15%, and MSFT with an expected return of 14% and volatility of 18%. Mary is more risk averse than Tom and both has a total of $1000 to invest in the risky assets. According to portfolio theory which
QUESTION 12 Investors can form complete portfolios out of a risk-free asset and a risky portfolio. The risky portfolio can be formed out of 2 risky stocks: AAPL with an expected return of 10% and volatility of 15%, and MSFT with an expected return of 14% and volatility of 18%. Mary is more risk averse than Tom and both has a total of $1000 to invest in the risky assets. According to portfolio theory which
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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Transcribed Image Text:QUESTION 12
Investors can form complete portfolios out of a risk-free asset and a risky
portfolio. The risky portfolio can be formed out of 2 risky stocks: AAPL with
an expected return of 10% and volatility of 15%, and MSFT with an expected
return of 14% and volatility of 18%. Mary is more risk averse than Tom and
both has a total of $1000 to invest in the risky assets. According to portfolio
theory, which of the following is consistent with both investors making the
optimal portfolio choices?
Mary invests $200 in AAPL and $800 in MSFT; Tom invests $200 in AAPL and
$800 in MSFT.
Mary invests $0 in AAPL and $1000 in MSFT; Tom invests $1000 in AAPL and
$0 in MSFT.
Mary invests $1000 in AAPL and $0 in MSFT; Tom invests $0 in AAPL and
$1000 in MSFT.
Mary invests $500 in AAPL and $500 in MSFT; Tom invests $900 in AAPL and
$100 in MSFT.
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