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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
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?
- There isn't enough information
- Invest 562.5 dollars in Stock Y and borrow 37.5 dollars at the risk-free rate
- Investment 562.5 dollars in Stock Y and lend 37.5 dollars at the risk-free rate
- Invest 600 dollars in Stock Y and there is no need to borrow or lend at the risk-free rate
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