Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Required: If the real interest rate is 3.70% per year and the expected inflation rate is 1.40%, what is the nominal interest rate according to
Required: If the real interest rate is 3.70% per year and the expected inflation rate is 1.40%, what is the nominal interest rate according to the Fisher equation (approximated)? (Round your answer to 2 decimal places.) You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40% respectively. X has an expected rate of return of 14%, and Y has an expected rate of return of 10%. To form a complete portfolio with an expected rate of return of 8%, you should invest approximately in the risky portfolio. This will mean you will also invest approximately and of your complete portfolio in security X and Y, respectively. Multiple Choice 0%;60%;40% 25%;45%;30% 40%;24%;16% Multiple Choice 0%;60%;40% 25%;45%;30% 40%;24%;16% 50%;30%;20%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started