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Suppose that Colin wants to combine Assets X and Y to form a riskless portfolio. Suppose that there are two states of the world: Good
Suppose that Colin wants to combine Assets X and Y to form a riskless portfolio. Suppose that there are two states of the world: Good and Bad. Consider the following return distribution of assets X and Y: Asset Xs rate of return is 10% in the good state, 2% in the bad state. Asset Ys rate of return is 4% in the good state, 16% in the bad state.
(a) What are portfolio weights of assets X and Y?
(b) What is riskless rate?
(10 points) Suppose that Colin wants to combine Assets X and Y to form a riskless portfolio. Suppose that there are two states of the world: Good and Bad. Consider the following return distribution of assets X and Y: Asset X's rate of return is 10% in the good state, 2% in the bad state. Asset Y's rate of return is 4% in the good state, 16% in the bad state. (a) (5 points )What are portfolio weights of assets X and Y? (b) (5 points) What is riskless rateStep by Step Solution
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