You invest $100 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 12% and a standard deviation of 10% and a treasury bill with a rate of return of 5%.
__________ of your complete portfolio should be invested in the risk-free asset if you want your complete portfolio to have a standard deviation of 9%.A) 100%
B) 90%
C) 50%
D) 10%
Answer: D
A portfolio that has an expected outcome of $115 could be formed if you __________.
A) invest $100 in the risky asset
B) invest $80 in the risky asset and $20 in the risk-free asset
C) borrow $42.86 at the risk-free rate and invest $142.86 in the risky asset
D) borrow $33.33 at the risk-free rate and invest $133.33 in the risky asset
A portfolio that has an expected outcome of $115 could be formed if you __________.
A) invest $100 in the risky asset
B) invest $80 in the risky asset and $20 in the risk-free asset
C) borrow $42.86 at the risk-free rate and invest $142.86 in the risky asset
D) borrow $33.33 at the risk-free rate and invest $133.33 in the risky asset
Answer: C
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