In a market, the risk-free interest rate is given to be 0.04. Consider a portfolio Y in
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In a market, the risk-free interest rate is given to be 0.04. Consider a portfolio Y in this market, whose Sharpe ratio is 0.4. He construct your his portfolio where he put a third of his wealth in the portfolio Y and the remainder of his wealth in the risk-free asset. The expected return of this portfolio is 0.08. He then decide to rebalance your portfolio so that its volatility will be 6%. How much must he invest in the risk-free asset?
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