Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. a complete portfolio is composed of risk-free secu

A complete portfolio is composed of risk-free security and a risky portfolio, P, constructed with...

70.2K

Verified Solution

Question

Finance

image

A complete portfolio is composed of risk-free security and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 40% and 60% respectively. Given the risk-free rate of 4%, X has an expected return of 10%, and Y has an expected return of 20%.

1. Figure out the expected return of the risky portfolio, P

2. To form a complete portfolio with the expected return of 22%, what are the portfolio weights for the risk-free security and the risky portfolio P, respectively? Explain your transaction to achieve a return of 22%.

Security Beta Standard Deviation Expected return S&P 500 1.0 15% 9.0% 0.0 0% 3.0% Risk-free security Stock D O 40% 12.0% Stock E 0.8 20% ( % Stock F 1.2 25% ()%

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Twenty years ago a very famous psychologist specializing in marriage counseling authored a book detailing...

Basic Math
Q

A)Let S = {1,2,3,...,18,19,20} be the universal set. Let sets A and B be subsets of S, where: Set...

Statistics
Q

In the binomial probability distribution, let the number of trials be n = 4, and let...

Statistics
Q

Instructions: Type your answer using the Micro soft word, Line spacing should be 1.5 space line...

Mechanical Engineering
Q

What is additive strategies and provide a thorough example applying this strategy. Also, what is elimination...

Advance Math
Q

Imagine that you repeat the Benzer tRNA Selection experiment with modifications as follows 1 Synthesize...

Biology
Q

When the cell concentrates potassium within, against the natural tendency of matter, it is performingpassive...

Biology
Q

The diagram below shows some of the major structures of a typical animal cell Golgi...

Biology
Q

Complete the sentence below.The distance d between two points P? = (x?.y?) and P? =...

Basic Math
Q

Which of the following conditions must be met in order to make a statistical inference...

Algebra
Q

Special revenue funds are created by the government for the use of special purposes. Why...

Accounting
Q

Sales and Production Budgets Sonic Inc. manufactures two models of speakers, Rumble and Thunder. Based...

Accounting