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
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
Related questions
Question
am. 119.
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)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 6 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education