You invest $1,000 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.
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?

Question

Quizplus · Accepted Answer

11% = w1(17%) + (1 - w1)(4%); 11% = 17%w1 + 4% - 4%w1; 7% = 13%w1; w1 = 0.538; 1 -w1 = 0.462; 0.538(17%) + 0.462(4%) = 11.0%.

You Invest $1,000 in a Risky Asset with an Expected