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Portfolio Return

You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of treasury bills that pay 5% and a risky portfolio, P, constructed with 2 risky securities X and Y. The weight of X and Y in portfolio, P, are 60% and 40% respectively. X has an expected rate of return of 14% and Y has an expected rate of return of 10%. To form a complete portfolio with an expected rate of return of 11%, what percentage of your complete portfolio should be invested in treasury bills? What should be the dollar values of your positions in X and Y respectively if you decide to hold 40% of your complete portfolio in the risky portfolio and 60% in the treasury bills?

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You are considering investing $1,000 in a complete portfolio.  The complete portfolio is composed of treasury bills that pay 5% and a risky portfolio, P, constructed with 2 risky securities X and Y.  The weight of X and Y in portfolio, P, are 60% and 40% respectively.  X has an expected rate of return of 14% and Y has an expected rate of return of 10%.

To form a complete portfolio with an ...

Solution Summary

Determines the percentage of complete portfolio that should be invested in treasury bills.

$2.19