Question: See problem below. Scenario implies there are 3 assets in the portfolio (including a risk-free asset) so I'm not sure how to calculate the portfolio
See problem below. Scenario implies there are 3 assets in the portfolio (including a risk-free asset) so I'm not sure how to calculate the portfolio weights. If this was only a 2 asset portfolio I know how to calculate, please explain how to calculate the below based on the 3 asset portfolio.
You have $10,000 to invest in a portfolio containing Stock R, Stock S, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 15% and that has only 120% of the risk of the overall market. If Stock R has an expected return of 25% and a beta of 1.6, Stock S has an expected return of 17.5% and a beta of 1.3, and the risk-free rate is 6%, how much money will you invest in Stock R? Explain your answer.
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