Use the incomplete data below to answer the following questions. Security/Portfolio	Expected Return, E[R]	Net Dollar Value Owned
T-bills (risk-free asset)	0.04	?
Market Portfolio	0.12	?
Portfolio X	?	$1,000.00

T-bills and the Market Portfolio are the only two components of Portfolio X. T-bills may be held long or short (i.e., T-bills may have positive or negative weights in Portfolio X).

2. $400 of Portfolio X is invested in the market portfolio. Determine the following:

xT-bills: ________ xMarket: ________ X: ________ E[RX]: _____________

3. Ignore question 2, $200 of Portfolio X is invested in T-bills. Determine the following:

xT-bills: ________ xMarket: ________ X: ________ E[RX]: _____________

4. Ignore questions 2 and 3. When constructing portfolio X you shorted $800 worth of T-bills (or borrowed $800). Determine the following:

xT-bills: ________ xMarket: ________ X: ________ E[RX]: _____________

5. Ignore the data in questions 2-4. Assume portfolio X has an expected return of 8%. What are the following?

xT-bills: _________________ xMarket: _________________ X: _________________

6. Ignore the data in questions 2-5. Assume portfolio X has an expected return of 30%. What are the following?

xT-bills: _________________ xMarket: _________________ X: _________________

Dollar amount in T-bills: $___________ Dollar amount in the Market: $___________

Explain what these answers mean in the space below:

7. If the market portfolio has = 0.40, and Portfolio Xs proportion invested in T-bills is 25%, then what are the following:

X = _____________________________

X = _____________________________

XM = _____________________________