Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

You have 1 0 0 0 dollars to invest and need to construct a portfolio with a beta of 1 . You decided to invest

You have 1000 dollars to invest and need to construct a portfolio with a beta of 1. You decided to invest 400 dollars in Stock X, which has a beta of 1.5. There is another stock, Stock Y, that has a beta of 0.8 and a risk-free asset. How much will you invest in Stock Y and will you need to borrow or lend with the risk-free rate?
A. There isn't enough information
B. Invest 562.5 dollars in Stock Y and borrow 37.5 dollars at the risk-free rate
C. Investment 562.5 dollars in Stock Y and lend 37.5 dollars at the risk-free rate
D. Invest 600 dollars in Stock Y and there is no need to borrow or lend at the risk-free rate

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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