Suppose that you purchase $8,000 of security A and$15,000 of security B, and borrow $3,000 of fund C. These transactions constitute your entire portfolio.

Determine the portfolio weights for each component of the portfolio. (Keep 2 decimal places to your answers.)

w_A:_______ ; w_B: _______ ; w_C: _______

Assume that borrowing takes place at a risk-free interest rate of 4%. The following additional information is given:

	A	B
Var(r)	0.25	0.49
E(r)	0.08	0.14

together with the correlation coefficient of A and B being 0.50. Compute the variance and expected rate of return of the portfolio. (Keep 4 decimal place to your answers.)

Expected rate of return: _______ Variance: _______

Determine how much money you can expect to receive at the end of the year with the investment. (Keep 2 decimal places to your answers.)

Amount expected to receive: $_______