You Are Considering Investing $1,000 in a Complete Portfolio

question 27

Multiple Choice

You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of treasury bills that pay 5% and a risky portfolio, P, constructed with 2 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:

Breakdown Cost

The expenses related to the failure or maintenance of machinery, equipment, or systems.

Electrical Motor

A device that converts electrical energy into mechanical energy, used in a vast range of applications from household appliances to industrial machinery.

Reliability Specification

Detailed requirements or standards that define the dependability or reliability performance of a product, system, or component.

Components In Series

This refers to the arrangement of parts or elements in a sequence where each component is connected directly after the previous one, ensuring the same current flows through all components.