You Are Considering Investing $1000 in a Complete Portfolio

question 25

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%. The dollar values of your positions in X, Y, and Treasury notes would be ________, ________ and ________ respectively if you decide to hold a complete portfolio that has an expected return of 8%.

• A)$162, $595, $243
• B)$243, $162, $595
• C)$595, $162, $243
• D)$595, $243, $162

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Definitions:

Property Rights

The legal rights to own, use, and dispose of assets including real estate, personal possessions, and intellectual property.

Producer Surplus

The difference between what producers are willing and able to sell a product for and the actual price they receive, representing the extra benefit to producers.

Consumer Surplus

The difference between the total amount that consumers are willing to pay for a good or service and the total amount they actually pay.

Quantity Demanded

The overall quantity of a product or service that buyers are prepared and can afford to buy at a certain price point, during a specific period.