You want to build a two-asset portfolio which includes the risk-free asset and the market portfolio. You want the portfolio to have an expected return of 11.5%. The expected return on the risk-free asset is 4% and the expected return on the market is 10%. What is the portfolio weight on the risk-free asset? possible answers: a. -0.25 b. -1.0 c. -1.5 d. -0.75
Added by Pedro D.
Step 1
Step 1: The formula for the expected return of a two-asset portfolio is: Expected return of portfolio = Weight of asset 1 * Expected return of asset 1 + Weight of asset 2 * Expected return of asset 2 Show more…
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