You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05.
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 0.09?

Question

Quizplus · Accepted Answer

9% = w1(12%) + (1 - w1)(5%); 9% = 12%w1 + 5% - 5%w1; 4% = 7%w1; w1 = 0.57; 1 - w1 =0.43; 0.57(12%) + 0.43(5%) = 8.99%.

You Invest $100 in a Risky Asset with an Expected