Question

You are considering investing $2,500 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 Pare 75% and 25% respectively. X has an expected rate of return of 18%, and Y has an expected rate of return of 14%. 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.

Multiple Choice

0%; 75%; 25%

50%; 38%; 13%

25%; 19%; 6%

32%; 57%; 11%

Answer 1