You Are Considering Investing $1,000 in a T-Bill That Pays

question 15

Multiple Choice

You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. What would be the dollar values of your positions in X and Y, respectively, if you decide to hold 40% of your money in the risky portfolio and 60% in T-bills?

• A) $240; $360
• B) $360; $240
• C) $100; $240
• D) $240; $160
• E) Cannot be determined.

---

Definitions:

Hypnotized

The state of being under hypnosis, characterized by heightened focus, reduced peripheral awareness, and increased responsiveness to suggestions.

Nonhypnotized

Refers to a state of normal consciousness without being under hypnosis, where an individual is fully aware and not influenced by hypnotic suggestion.

Puzzlement

The state of being confused or perplexed.

Sharp Pain

A sudden, intense sensation of discomfort or distress.