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You have a total of $40,000 to invest in Stock A, Stock B and a risk free asset. You must invest all of your money.
You have a total of $40,000 to invest in Stock A, Stock B and a risk free asset. You must invest all of your money. Your objective is to construct a portfolio that has an expected return of 11% and is only 75% as risky as the overall market. If Stock A has a beta of 1.4 and an expected return of 16%, Stock B has a beta of 1.1 and an expected return of 15%, and the risk free rate is 2%, how much money will you invest in the risk free asset?
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