Question
You are considering investing $10,000 in a T-bill that pays 4% and a risky portfolio, P , constructed with two risky securities, X and Y
You are considering investing $10,000 in a T-bill that pays 4% and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.40 and 0.60, respectively. X has an expected rate of return of 17% and variance of 0.09, and Y has an expected rate of return of 10% and a variance of 0.0081. If you want to form a total portfolio with an expected rate of return of 11.04%, what percentages of your money must you invest in the T-bill, X, and Y, respectively, if you keep X and Y in the same proportions to each other as in portfolio P?
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