You want to create a portfolio equally as risky as the market, and you have $1,2

Question

You want to create a portfolio equally as risky as the market, and you have $1,200,000 to invest. Information about the possible investments is given below:

Asset Investment Beta
Stock A $ 240,000 .70
Stock B $ 360,000 1.20
Stock C 1.45
Risk-free asset

Required:
(a)

How much will you invest in Stock C? (Do not include the dollar sign ($). Round your answer to 2 decimal places. (e.g., 32.16))

Investment in Stock C $

(b)

How much will you invest in the risk-free asset? (Do not include the dollar sign ($). Round your answer to 2 decimal places. (e.g., 32.16))

Investment in risk-free asset $

Explanation / Answer

a)Beta for market is 1 ( $ 240,000*.70 + $ 360,000*1.20 + x*1.45)/$1,200,000 = 1 x= $413,793.10 Investment in Stock C =$413,793.10 B) Investment in risk-free asset =$1,200,000 - $ 240,000-$ 360,000-$413,793.10 = $186,206.90

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.