You invest $10,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 21% and a Treasury bill with a rate of return of 5%. How much money should be invested in the risky asset to form a portfolio with an expected return of 11%

$6,000

Explanation:

The computation of the amount invested in the risky asset is shown below;

Let us assume

R = Proportion of risky asset

T = T-bill proportion

We can say that

R + T = 100% and 100% be considered as 1

So, T = R - 1

First we have to determine the R which is calculated by the following formula

the expected return of portfolio = (Return of risky asset × proportion of risky asset) +  (Return of T-bill × proportion of t-bill)

11% = (15% × R) + (5% × (1 - R)

11% = 15%R + 5% - 5%R

R = 60%

Now the amount invested is

= Total amount invested × R

= $10,000 × 60%

= $6,000

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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