You have $9,000 to invest. You've done some security analysis and generated the following data for...

70.2K

Verified Solution

Question

Finance

You have $9,000 to invest. You've done some security analysisand generated the following data for three stocks and Treasurybills, including weights in the optimal risky portfolio (ORP) fromdoing Markowitz portfolio optimization:
Security Stock A Stock B Stock C T-bills
Expected return (%) 12 8 5 4
Variance 0.04 0.03 0.02 0
Beta 1.2 1.5 0.8 0
Weight in ORP (%) 44 18 38 0
Part 1
What is the expected return of the optimal risky portfolio(ORP)?
Part 2
How much money should you invest in the ORP to achieve anexpected return of 8% for the complete portfolio (in $)?
Part 3
If you want to achieve an expected return of 8% for the completeportfolio, how much money should you invest in stock A (in $)?

Security	Stock A	Stock B	Stock C	T-bills
Expected return (%)	12	8	5	4
Variance	0.04	0.03	0.02	0
Beta	1.2	1.5	0.8	0
Weight in ORP (%)	44	18	38	0

Answer & Explanation Solved by verified expert

3.7 Ratings (644 Votes)

A Expected return of A 12 Expected return of B 8 Expected return of C 5 weight of A in ORP 44 or 044 weight of B in ORP 18 or 018 weight of C in ORP 38 or 038 Expected return of risky See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member