Question
Linda plans to invest in a portfolio which comprises an equity (risky) fund and a T-bill money market fund. The equity fund invested 60% in
Linda plans to invest in a portfolio which comprises an equity (risky) fund and a T-bill money market fund. The equity fund invested 60% in stock A and 40% in stock B. The expected return of stock A is 26%. The expected return of stock B is 12%. The variance of the equity fund is 8.41%. T-bill rate is 3%. If Linda decides to invest 120% of her money in the equity fund, what are the investment proportions in stock A, in stock B, and in T-bill fund?
A. | Stock A: 48%; Stock B: 72%; T-Bill fund: -20% | |
B. | Stock A: 60%; Stock B: 40%; T-Bill fund: 0% | |
C. | Stock A: 72%; Stock B: 48%; T-Bill fund: -20% | |
D. | Stock A: 72%; Stock B: 48%; T-Bill fund: 20% |
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