You want to create a portfolio equally as risky as the market, and you have $500

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).)

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).)

  Asset Investment Beta   Stock A $ 148,000       .93         Stock B $ 132,000       1.38         Stock C 1.53         Risk-free asset

Explanation / Answer

We can check the solution to find weighted beta =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).)

Answer is 117778

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).)

Answer is 102222

A Portfolio will be equily risky as the market when Weighted Beta is equal to 1 hence Weighted Beta = 1

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