Megan has $10,000 USD to invest and decides to invest 90% of her fund in risk-free assets, and the remaining 10% in risky assets. She would like to hear your suggestions about risky investments. You have prepared different risky portfolio investment plans. Please use the table below to answer the following parts.

Option	Weight of Stock	Weight of Bond	Risky portfolio return	Risky portfolio standard deviation	Sharpe ratio
1	0.00%	100.00%	12.00%	20.00%	0.2000
2	10.00%	90.00%	13.00%	18.49%	0.2704
3	20.00%	80.00%	14.00%	17.47%	0.3434
4	30.00%	70.00%	15.00%	17.03%	0.4110
5	40.00%	60.00%	16.00%	17.21%	0.4647
6	50.00%	50.00%	17.00%	18.00%	0.5000
7	60.00%	40.00%	18.00%	19.32%	0.5177
8	70.00%	30.00%	19.00%	21.06%	0.5222
9	80.00%	20.00%	20.00%	23.14%	0.5185
10	90.00%	10.00%	21.00%	25.48%	0.5102
11	100.00%	0.00%	22.00%	28.00%	0.5000

If Megan would like to invest in a risky portfolio with portfolio risk less than 17.5%, which portfolio is the best candidate? How much (in USD) should she invest in bond? Please explain your answers.

If Megan considers herself as an investor who is “more risk-averse than any other investors”, which portfolio is the best option to her? How much (in USD) should she invest in stock? Please explain your answers.

Answer rating: 100% (QA)

I If megan would like to invest in portfolio with portfolio risk less than 175 ... View the full answer