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You want to create a portfolio equally as risky as the market, and you have $1,200,000...

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Finance

You want to create a portfolio equally as risky as the market,and you have $1,200,000 to invest. Consider the followinginformation:

Asset Investment Beta

Stock A $240,000 0.60

Stock B $360,000 1.25

Stock C 1.60

Risk-free asset Required:

(a) What is the investment in Stock C? (Do not round yourintermediate calculations.)

(b) What is the investment in risk-free asset? (Do not roundyour intermediate calculations.)

Answer & Explanation Solved by verified expert
4.0 Ratings (660 Votes)
We need to understand that the beta of market portfolio is 1and that of the risk free asset is 0We have a total of 1200000 to invest of    See Answer
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Transcribed Image Text

You want to create a portfolio equally as risky as the market,and you have $1,200,000 to invest. Consider the followinginformation:Asset Investment BetaStock A $240,000 0.60Stock B $360,000 1.25Stock C 1.60Risk-free asset Required:(a) What is the investment in Stock C? (Do not round yourintermediate calculations.)(b) What is the investment in risk-free asset? (Do not roundyour intermediate calculations.)

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