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).)

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:

Explanation / Answer

Statement showing computations Particulars Amount Weight Beta Weighted Beta Stock A             141,000.00                               0.2820            0.86                      0.2425 Stock B             139,000.00                               0.2780            1.31                      0.3642 Stock C x x/500,000            1.46 1.46(x/500,000) Risk Free Asset 220,000 - x (220,000-x)/500,000                 -                                 -               500,000.00                          1.00 .2425 + .3642 + 1.46x/500,000 = 1 .6067 + 1.46x/500,000 = 1 1.46x/500,000 = .3933 x = 134,691.78 Rf Asset= 220,000 - 134,691.78 Rf Asset= 85,308.22

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