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Changing risk level. Mr. Malone wants to change the overall risk of his portfolio. Currently, his portfolio is a combination of risky assets with a
Changing risk level. Mr. Malone wants to change the overall risk of his portfolio. Currently, his portfolio is a combination of risky assets with a beta of 1.25 and an expected return of 14%. He will add a risk-free asset (U.S. Treasury bill) to his portfolio. If he wants a beta of 1.00, what percentage of his wealth should be in the risky portfolio and what percentage should be in the risk-free asset? If he wants a beta of 0.75 ? If he wants a beta of 0.50 ? If he wants a beta of 0.25 ? Is there a pattern here? If he wants a beta of 1.00, then he should have % of his wealth in the risky portfolio and % in the risk-free asset. (Round both answers to two decimal places.)
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