You are considering investing $1,000 in a complete portfolioin a T - bill that pays a rate of return of 0.06and a risky portfolio, P, constructed with two risky securities A and B. The weights of A and B in P are 60% and 40%, respectively. Stock A has an expected rate of return of 0.13 and a variance of 0.01, and Stock B has an expected rate of return of 0.2 and a variance of 0.0081. If you want to form a complete portfolio with an expected rate of return of 0.08, what percentages of your money must you invest in the T - bill, A, and B, respectively, if you keep A and B in the sameAA

You are considering investing $1,000 in a complete portfolioin a T - bill that pays a rate of return of 0.06and a risky portfolio, P, constructed with two risky securities A and B. The weights of A and B in P are 60% and 40%, respectively. Stock A has an expected rate of return of 0.13 and a variance of 0.01, and Stock B has an expected rate of return of 0.2 and a variance of 0.0081. If you want to form a complete portfolio with an expected rate of return of 0.08, what percentages of your money must you invest in the T - bill, A, and B, respectively, if you keep A and B in the sameAA

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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You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.25 and an expected return of 15%. The other stock has an expected return of 21%. The total portfolio is equally as risky as the market (i.e.Bp=1). What is the beta for the other stock in your portfolio? What is the expected return of the risk-free asset? What is the expected return of the market? What is the expected return of your portfolio?
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