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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