Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You consider investing $100 in a portfolio consisting of a stock and the risk-free rate for one-period. The stock has an expected return of 12%

You consider investing $100 in a portfolio consisting of a stock and the risk-free rate for one-period. The stock has an expected return of 12% and a standard deviation of 15% and the risk-free rate is 5%. If you want your portfolio to have an expected value after one-period of $115, it should be formed by (round to the nearest dollar):-

-investing $43 in the stock and $57 in the risk-free asset

-borrowing $43 at the risk-free rate and investing the total amount in the stock-

-None of the available answer choices

-investing $100 in the stock

-investing $80 in the stock and $20 in the risk-free asset

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Venture Capital And The Finance Of Innovation

Authors: Andrew Metrick, Ayako Yasuda

3rd Edition

1119490111, 978-1119490111

More Books

Students also viewed these Finance questions

Question

=+d) Interpret the coefficient of the dummy variable named Q3.

Answered: 1 week ago

Question

Identify ways to increase your selfesteem.

Answered: 1 week ago