The Horizons Bull Plus Fund seeks daily investment results that correspond to two times (200%)the daily performance of the S&P 500 Index.If you wanted to build a portfolio out of T-Bills and the S&P Index to mimic the performance of the Bull Plus Fund,then what are the portfolio weights? Assume that the expected return on the S&P index is 10%,the risk free rate is 4%. A) w_S&P = 1.5 and w_T-Bill = -0.5 B) w_S&P = 1.67 and w_T-Bill = -0.67 C) w_S&P = 2 and w_T-Bill = -1 D) w_S&P = 2.33 and w_T-Bill = -1.33 E) w_S&P = 2.67 and w_T-Bill = -1.67

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The expected return on the Horizons Bull Plus Fund is equal to twice the expected return on the market portfolio: E(k) = 2 × E( 11ea7fdb_fc0e_6aaf_a768_adda86f3a004_TB2902_11 ) E(k) = 2 × 0.10 = 0.20 or 20% We know that the expected return on the portfolio, which we found must be 20%, is the sum of each individual security's expected return multiplied by its portfolio weight: Let w be the weight of the T-Bills E(k) = w(k_F) + (1 - w)(E(k_M)) 0.20 = w(0.04) + 0.10 - 0.10w 0.10 = 0.04w - 0.10w 0.10 = -0.06w w = -1.67 The weight of the S&P Index = 1 - w or 1 - (-1.67) = 2.67

The Horizons Bull Plus Fund Seeks Daily Investment Results That