Question

You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. What would be the dollar values of your positions in X and Y, respectively, if you decide to hold 40% of your money in the risky portfolio and 60% in T-bills

Answer 1

The answer is "
`x=\$240 \ and \ y= \$160`"

Step-by-step explanation:

Total amount
`= \$1000`

when
`40\%` a risky portfolio
`= 0.4 * \$1000=\$400`

calculating the risky portfolio value on
`(\$400)`

When
`60\%` consist of x

`\to \$400 * 0.6\\\\\to \$240`

When
`40\%` consist of y

`\to \$400 * 0.4\\\\\to \$160`

So, the dollar value in
`x=\$240 \ and \ y= \$160`