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The market value of a portfolio is $500,000. Of this amount $100,000 is invested in a risk-free government bond. The remaining $400,000 is invested in a risky portfolio consisting of $250,000 equity fund and $150,000 in a corporate bond. a) Calculate the following weights: • • Weight of the risky portfolio in the complete portfolio Weight of the corporate bond in the risky portfolio Weight of the equity fund in the complete portfolio •

The market value of a portfolio is $500,000. Of this amount $100,000 is invested in a risk-free government bond. The remaining $400,000 is invested in a risky portfolio consisting of $250,000 equity fund and $150,000 in a corporate bond. a) Calculate the following weights: • • Weight of the risky portfolio in the complete portfolio Weight of the corporate bond in the risky portfolio Weight of the equity fund in the complete portfolio •

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
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am. 119.

The market value of a portfolio is $500,000. Of this amount $100,000 is invested in a risk-free government bond. The remaining $400,000 is invested in a risky portfolio consisting of $250,000 equity fund and $150,000 in a corporate bond. a) Calculate the following weights: Weight of the risky portfolio in the complete portfolio • Weight of the corporate bond in the risky portfolio Weight of the equity fund in the complete portfolio b) The investor decides to reduce the equity fund in the risky portfolio to 40% and invest the proceeds from selling the equity fund in the risk-free government bond. How does that change the dollar value of each component of the risky and complete portfolio and the relative weights under a)
Transcribed Image Text:The market value of a portfolio is $500,000. Of this amount $100,000 is invested in a risk-free government bond. The remaining $400,000 is invested in a risky portfolio consisting of $250,000 equity fund and $150,000 in a corporate bond. a) Calculate the following weights: Weight of the risky portfolio in the complete portfolio • Weight of the corporate bond in the risky portfolio Weight of the equity fund in the complete portfolio b) The investor decides to reduce the equity fund in the risky portfolio to 40% and invest the proceeds from selling the equity fund in the risk-free government bond. How does that change the dollar value of each component of the risky and complete portfolio and the relative weights under a)
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