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In: Finance
You are considering investing $10,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 3.75% and a risky portfolio, P, constructed with two risky securities, X and Y.
You are considering investing $10,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 3.75% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 32.7% and 67.3%, respectively. X has an expected rate of return of 8.5%, and Y has an expected rate of return of 13.8%. The dollar values of your positions in X, Y, and Treasury bills would be ________, ________, and ________, respectively, if you decide to hold a complete portfolio that has an expected return of 10.11%.
Solutions
Expert Solution
Weight of each stock in Complete Portfolio = Weight in COmplete Portfolio * weight in Risky Portfolio.
| Particulars | Weight in Complete Portfolio | Weight in Ind Portfolio | Each Stock weight | Investment | Amount Invested |
| X | 80% | 32.70% | 26.16% | $ 10,000.00 | $ 2,616.00 |
| Y | 80% | 67.30% | 53.84% | $ 10,000.00 | $ 5,384.00 |
| Treasury Bill | 20% | 100% | 20.00% | $ 10,000.00 | $ 2,000.00 |
| Total | $ 10,000.00 |
jeff jeffy answered 2 years agoRelated Solutions
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