You invest all your money into a risky asset and a risk-free asset. The risky asset...

You invest all your money into a risky asset and a risk-free asset. The risky asset has an expected return of 0.065 and a standard deviation of 0.25, the risk-free asset returns 0.025. What is the return on your combined portfolio if you invest 0.4 in the risky asset, and the remainder in the risk-free asset? Round your answer to the fourth decimal point.

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Expert Solution

Portfolio return is equal to weighted average return

= 0.065*0.4 + 0.025*0.6

= 0.041 or 4.1%

jeff jeffy answered 2 years ago

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