12 value: 1.37 points You want to create a portfolio equally as risky as the mar

Question

12 value: 1.37 points 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 $138,000 142,000 Beta 83 1.28 Stock A Stock B Stock C Risk-free asset How much will you invest in Stock C? (Do not round intermediate calculations and 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 and round your answer to 2 decimal places, e.g., 32.16.) Investment in risk-free asset

Explanation / Answer

let weight in C be w

weight in A and B are 138/500 and 142/500 respectively or 0.276 and 0.284

0.276*0.83 + 0.284*1.28 + w*1.43 = 1

w = 0.2849

investment in C = 0.2849 * 500,000 = 142,447.55

investment in risk free asset = 500,000 - 138,000 - 142,000 - 142,447.55 = 77,552.45

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