You Invest $100 in a Risky Asset with an Expected

question 5

Multiple Choice

You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T-bill with a rate of return of 0.045. What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.13?

• A) 130.77% and −30.77%
• B) −30.77% and 130.77%
• C) 67.67% and 33.33%
• D) 57.75% and 42.25%
• E) Cannot be determined.

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