This preview shows page 1. Sign up to view the full content.
Unformatted text preview: bills) (1-x) = 0.811 (risky asset). 11. If you want to form a portfolio with an expected rate of return of 0.10, what percentages of your money must you invest in the T-bill, X, and Y, respectively if you keep X and Y in the same proportions to each other as in portfolio P? A) 0.25; 0.45; 0.30 B) 0.19; 0.49; 0.32 C) 0.32; 0.41; 0.27 D) 0.50; 0.30; 0.20 E) cannot be determined Answer: C Difficulty: Difficult Rationale: E(r P ) = .100.10 = 5w + 12.4(1 - w); x = 0.32 (weight of T-bills); As composition of X and Y are .6 and .4 of P, respectively, then for 0.68 weight in P, the respective weights must be 0.41 and 0.27; .6(.68) = 41%; .4(.68) = 27% Bodie, Investments, Sixth Edition...
View Full Document
This note was uploaded on 01/31/2010 for the course ECON 3660DE taught by Professor Patrickmartinandvitalialexeev during the Spring '10 term at University of Guelph.
- Spring '10