Explore BrainMass

Explore BrainMass

    Balancing a Portfolio of Risky vs. Risky Free Assets

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    You invest $1000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04

    A) What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.11?

    B) What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.20?

    C) What is the slope of the Capital Allocation Line formed with the risky asset and the risk-free asset?

    -I am having trouble looking in the book and figuring out exactly what formula to use. Included in the answer, please have a full description of how the problem is solved and what formula is used.

    © BrainMass Inc. brainmass.com June 4, 2020, 2:20 am ad1c9bdddf
    https://brainmass.com/business/financial-ratios/balancing-portfolio-risky-risky-free-assets-452876

    Solution Preview

    Please see the attached file(s) for the complete tutorial.

    NOTE:
    Without ...

    Solution Summary

    The solution balances a portfolio of risky vs. risky free assets etc.

    $2.19

    ADVERTISEMENT