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You are considering investing $900 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, A and B. The
You are considering investing $900 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, A and B. The weights of A and B in P are 0.65 and 0.35, respectively. A has an expected rate of return of 0.15 and variance of 0.04, and B has an expected rate of return of 0.20 and a variance of 0.0081. If you want to form a portfolio with an expected rate of return of 0.13, what percentages of your money must you invest in the T-bill and P, respectively?
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