Suppose Karl has $9197 and want to invest these funds to make a portfolio with a beta of 0.42 by investing in the market portfolio and by borrowing/lending at the risk-free rate. What would his portfolio composition be?

a)$5334 borrowed at the risk-free rate and $13060 invested in the market portfolio.

b)$4598 invested at the risk-free rate and $4598 invested in the market portfolio.

c)$9197 invested in the market portfolio.

d)$5334 invested at the risk-free rate and $3863 invested in the market portfolio.

e)$3863 invested at the risk-free rate and $5334 invested in the market portfolio.

Answer rating: 100% (QA)

Therefore the correct answer is d 5334 invested at the riskfree rate and 3863 invested in ... View the full answer