Portfolio forming the tangency point

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Suppose you have an economy with only two risky assets X and Y. You are given the following information:

Security  

E(R)

Sigma

COV (X,Y)

X

9.168%

0.096

-0.00905

Y

12%

0.10

Suppose you have a risk-free asset (T-bill) that pays 5% and that the proportions to invest in each risky security to form the optimal portfolio (P*) [in other words, the portfolio forming the tangency point between the CAL with highest slope and the efficient frontier are: . If you want to achieve a rate of return 14% using P* and the T-bill, how much will you invest in each?

Reference no: EM133109536

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