You Are Considering Investing $1000 in a Complete Portfolio

question 45

Multiple Choice

You are considering investing $1000 in a complete portfolio. The complete portfolio is composed of Treasury notes that pay 5% and a risky portfolio, P, constructed with two risky securities X and Y. The optimal weights of X and Y in P are 60% and 40% respectively. X has an expected rate of return of 14% and Y has an expected rate of return of 10%. To form a complete portfolio with an expected rate of return of 8%, you should invest approximately ________ in the risky portfolio. This will mean you will also invest approximately ________ and ________ of your complete portfolio in security X and Y respectively.

• A)0%, 60%, 40%
• B)25%, 45%, 30%
• C)40%, 24%, 16%
• D)50%, 30%, 20%

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Definitions:

Tight Labour Market

Economic conditions characterized by low unemployment rates and high demand for workers, often leading to increased wages and a competitive environment for hiring.

Labour Supply

The total hours that workers are willing and able to work at a given wage rate.

Engineering School Graduates

Engineering school graduates refer to individuals who have successfully completed an engineering program at a college, university, or technical school.

Job Sharing Arrangements

A work structure where two or more individuals share the responsibilities and duties of a single full-time job.