Suppose that investors can invest in portfolios constructed from three risky assets, A, B and C and a risk free asset, F. The investors' behavior is consistent with the Modern Portfolio Theory (and assets A, B, C and F are the only available assets in the market). The expected return on a unit invested in each of these assets is shown in the table below. Asset Expected return A 0.08 B 0.10 C 0.15 F 0.05 Investor X holds 25% of his portfolio in asset A and 25% in the risk-free asset. Investor Y holds 10% of his portfolio in asset B and 60% in risk-free asset. The standard deviation of investor X's portfolio is 0.13.
Suppose that investors can invest in portfolios constructed from three risky assets, A, B and C and a risk free asset, F. The investors' behavior is consistent with the Modern Portfolio Theory (and assets A, B, C and F are the only available assets in the market). The expected return on a unit invested in each of these assets is shown in the table below. Asset Expected return A 0.08 B 0.10 C 0.15 F 0.05 Investor X holds 25% of his portfolio in asset A and 25% in the risk-free asset. Investor Y holds 10% of his portfolio in asset B and 60% in risk-free asset. The standard deviation of investor X's portfolio is 0.13.
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
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Transcribed Image Text:Suppose that investors can invest in portfolios constructed from three risky assets, A, B and C and a
risk free asset, F. The investors' behavior is consistent with the Modern Portfolio Theory (and assets
A, B, C and F are the only available assets in the market). The expected return on a unit invested in
each of these assets is shown in the table below.
Asset
Expected return
A
0.08
B
0.10
C
0.15
F
0.05
Investor X holds 25% of his portfolio in asset A and 25% in the risk-free asset. Investor Y holds
10% of his portfolio in asset B and 60% in risk-free asset.
The standard deviation of investor X's portfolio is 0.13.
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