You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T-bill with a rate of return of 0.045.
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 0.13?

Question

Quizplus · Accepted Answer

13% = w1(11%) + (1 - w1)(4.5%); 13% = 11%w1 + 4.5% - 4.5%w1; 8.5% = 6.5%w1; w1 = 1.3077; 1 - w1 =0.3077; 1.308(11%) + (-0.3077)(4.5%) = 13.00%.

You Invest $100 in a Risky Asset with an Expected