Question

You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05. What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.09?

Answer 1

The answer is "
`60\% \ in \ risky \ asset`"

Step-by-step explanation:

`\to 0.09 = x(0.15)\\\\\to x=(0.09)/(0.15)\\\\\to x=(9)/(15)\\\\\to x= 0.6`

`\to x = 0.6 \approx 60\%` in the risky asset.