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

question 5

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 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:

Social Factors

Elements within society, including cultural norms, education, and family influences, that impact an individual's behavior, attitudes, and opportunities.

Cultural Factors

The social, economic, and political aspects of a culture that influence individuals' behaviors, beliefs, and attitudes.

Erikson

Refers to Erik Erikson, a developmental psychologist and psychoanalyst known for his theory on the psychological development of human beings, identifying eight stages of human development.

Behaviorist Theory

A theory of learning which states that behaviors are learned from the environment through the processes of conditioning.