Suppose you have an economy with only two risky assets X and Y . You are given
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Suppose you have an economy with only two risky assets X and Y. You are given the following information:
Security | E(R) | Sigma | COV (X,Y) |
X | 9.168% | 0.096 | -0.00905 |
AND | 12% | 0.10 |
Suppose you have a risk-free asset (T-bill) that pays 5% and that the proportions to invest in each risky security to form the optimal portfolio (P*) [in other words, the portfolio forming the tangency point between the CAL with highest slope and the efficient frontier are: . If you want to achieve a rate of return 14% using P* and the T-bill, how much will you invest in each?
Related Book For
Principles of Macroeconomics
ISBN: 978-0134078809
12th edition
Authors: Karl E. Case, Ray C. Fair, Sharon E. Oster
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