The rest of your capital in risk-free rate

Reference no: EM131947429

Assume that as an investor, you decide to invest part of your wealth in a risky asset that has an expected return of 20%, and a standard deviation of 15%. You invest the rest of your capital in the risk-free rate, which offers a return of 2%.

You want the resulting portfolio to have an expected return of 7%. What percentage of your capital should you invest in the risky asset?

Reference no: EM131947429

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