Question

You want to invest

​$40 000

in a portfolio with a beta of no more than

1.4

and an expected return of

12.9​%.

Bay Corporation has a beta of

1.01

and an expected return of

10.7​%,

and City Limited has a beta of

1.86

and an expected return of

15.49​%.

The​ risk-free rate is

5​%.

Is it possible to create this portfolio investing in Bay Corporation and City​ Limited? If​ so, how much will you invest in​ each?

Answer 1