You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y.The weights of X and Y in P are 0.60 and 0.40, respectively.X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. What would be the dollar values of your positions in X and Y, respectively, if you decide to hold 40% of your money in the risky portfolio and 60% in T-bills?

Question

Quizplus · Accepted Answer

If you decide to hold 40% of your $1,000 investment in the risky portfolio, that amounts to $400. Within the risky portfolio, 60% of your funds would be allocated to X and 40% to Y. Therefore, $400 * 0.60 = $240 would be invested in X, and $400 * 0.40 = $160 would be invested in Y.

You Are Considering Investing $1,000 in a T-Bill That Pays