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Changing risk level. Mr. Malone wants to change the overall risk of his portfolio. ...

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Finance

Changing risk level.

Mr. Malone wants to change the overall risk of his portfolio. Currently, his portfolio is a combination of risky assets with a beta of 1.25 and an expected return of 14%.

He will add a risk-free asset (U.S. Treasury bill) to his portfolio.

1. If he wants a beta of 1.00, what percentage of his wealth should be in the risky portfolio and what percentage should be in the risk-free asset?

2. If he wants a beta of 0.75, what percentage of his wealth should be in the risky portfolio and what percentage should be in the risk-free asset?

3. If he wants a beta of 0.50, what percentage of his wealth should be in the risky portfolio and what percentage should be in the risk-free asset?

4. If he wants a beta of 0.25, what percentage of his wealth should be in the risky portfolio and what percentage should be in the risk-free asset?

5. Is there a pattern here?

(Round all answers to two decimal places.)

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