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You invest $1000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04.

1) What percentage of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.11?

2) What percentage of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.20?

3) What is the slope of the Capital Allocation Line formed with the risky asset and the risk-free asset equal to?

4) What percentage of your money must be invested in the risky asset and the risk-free asset, respectively, to form an optimal portfolio if your coefficient of risk aversion A=4?

Basic Finance, Finance

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