You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is as follows: stock A ($144,000 worth of stock A and beta of 0.89), stock B ($136.000 worth of stock B and beta of 1.34), stock C ($X worth of stock C and beta of 1.49), and risk-free asset ($Y worth of risk-free asset). How much will you invest in risk-free asset?

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
icon
Related questions
Question
You want to create a portfolio equally as risky as the market, and you have $500,000
to invest. Information about the possible investments is as follows: stock A
($144,000 worth of stock A and beta of 0.89), stock B ($136.000 worth of stock B
and beta of 1.34), stock C ($X worth of stock C and beta of 1.49), and risk-free asset
($Y worth of risk-free asset). How much will you invest in risk-free asset?
1) $127.248
2) $92,752
3) $115,348
4) $136.000
Transcribed Image Text:You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is as follows: stock A ($144,000 worth of stock A and beta of 0.89), stock B ($136.000 worth of stock B and beta of 1.34), stock C ($X worth of stock C and beta of 1.49), and risk-free asset ($Y worth of risk-free asset). How much will you invest in risk-free asset? 1) $127.248 2) $92,752 3) $115,348 4) $136.000
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Investment in Stocks
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.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
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…
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