There are two risky assets; their expected returns are 10% and 8%, and their volatilities are 20% and 10%. The correlation between the two assets is zero. The risk-free rate is 2%. Assume that you are considering investing $10,000 into the three assets (two risky and one risk-free), and you have decided that $4,000 should be invested into the risk-free asset (the remaining goes to the risky ones). If you are a mean-variance efficient investor, how much money will you invest in asset 1 (the one with a 10% expected return and a 20% volatility)? answers: $1500 $4800 $6000 $2400
There are two risky assets; their expected returns are 10% and 8%, and their volatilities are 20% and 10%. The correlation between the two assets is zero. The risk-free rate is 2%. Assume that you are considering investing $10,000 into the three assets (two risky and one risk-free), and you have decided that $4,000 should be invested into the risk-free asset (the remaining goes to the risky ones). If you are a mean-variance efficient investor, how much money will you invest in asset 1 (the one with a 10% expected return and a 20% volatility)? answers: $1500 $4800 $6000 $2400
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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There are two risky assets; their expected returns are 10% and 8%, and their volatilities are 20% and 10%. The correlation between the two assets is zero. The risk-free rate is 2%. Assume that you are considering investing $10,000 into the three assets (two risky and one risk-free), and you have decided that $4,000 should be invested into the risk-free asset (the remaining goes to the risky ones). If you are a mean-variance efficient investor, how much money will you invest in asset 1 (the one with a 10% expected return and a 20% volatility)?
answers:
$1500
$4800
$6000
$2400
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