You want to create a portfolio equally as risky as the market, and you have $500
ID: 2635079 • Letter: Y
Question
You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is given below:
How much will you invest in Stock C? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Investment in Stock C = ?
How much will you invest in the risk-free asset? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Investment in Risk-Free Asset is?
You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is given below:
Asset Investment Beta Stock A $120,000 .80 Stock B $150,000 1.15 Stock C 1.40 Risk-Free Asset Requirement 1:How much will you invest in Stock C? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Investment in Stock C = ?
Requirement 2:How much will you invest in the risk-free asset? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Investment in Risk-Free Asset is?
Explanation / Answer
How much will you invest in Stock C? (Do not round intermediate calculations. Round your answer to 2 decimal places
($120,000)(0.8) + ($150,000)(1.15) + x(1.40) = (120,000 + 150,000 + x)(1)
$96,000 + 172500 + 1.40x = $270,000 + x
0.40x = 1500
x = $3750 to be invest in stock C
How much will you invest in the risk-free asset?
$500,000 - $120,000 - $150,000 - $3750 = $226,250
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