You Invest $100 in a Risky Asset with an Expected

question 7

Multiple Choice

You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.20 and a T-bill with a rate of return of 0.03. What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.08?

• A) 30% and 70%
• B) 50% and 50%
• C) 60% and 40%
• D) 40% and 60%
• E) Cannot be determined.

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