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:

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