An investor wants to form a two-asset portfolio consisting of Treasury bills with a return of 2.5%
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Question:
An investor wants to form a two-asset portfolio consisting of Treasury bills with a return of 2.5% and a risky portfolio with an expected return of 15.2% and a standard deviation of 16%. The investor wants the expected return of the two asset portfolios to be 13%.
a. What fraction y of the investor’s funds should be invested in the risky portfolio?
b. What is the standard deviation of the two asset portfolio?
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