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Examples 1. Suppose there are only three risky assets in the world: A, B, and...

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Examples 1. Suppose there are only three risky assets in the world: A, B, and C. Assume that the value of asset A is 30 million, asset B 30 million, and asset C 40 million. In this case the Market Portfolio has the following composition: Asset Weight in the Market Portfolio A 30% B 30% C 40% Assume the expected return and volatility of the Market Portfolio are both equal to 10%, Risk-free rate is 4% Investor X has a target return of 7%. What is the composition of her optimal portfolio? How much should she invest in the risk-free asset and each of the 3 risky assets that make up the Market Portfolio

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