Portfolio beta You want to create a portfolio that is exactly 50% as risky as the market. You want to create this portfolio from three assets: Stock A, Stock B, and a risk-free asset. Historical returns for each are listed below, along with the historical returns from the market.

Suppose you have $24,000 in total to invest and you know you want to invest $8,000 in the risk-free asset. In order to get your desired risk level, how much of the remainder would you invest in Stocks A and B, respectively?

Transcribed Image Text:

Historical year Stock A return Stock B return Risk-free rate 1 12.43 % 11.12 % 2.32% Market retum 8.43 % 2 10.55 8.11 3.01 11.90 3 9.43 3.22 1.98 13.31 4 6.32 -2.11 2.31 6.43 5 8.43 -1.08 2.43 7.08