A) Assume that you own an initial portfolio of total market value $500,000, of which $120,000 is invested in money market fund (which is considered risk free). The remaining of your portfolio is invested in risky securities, $246,000 in equity market (E) and $134,000 in long-term bonds (B).

What is the weight of equity in the complete portfolio?

B) Suppose you wish to decrease risk by reducing the allocation to the risky portfolio by $50,000, which you use to purchase more shares in the money market fund. Also, assume that the proportions of each risky asset within the risky portfolio remain unchanged, what is the new weight of equity in the complete portfolio now?

C) Using the same conditions in 2, what is the new weight of long-term bonds in the complete portfolio now?