Value at risk for expected return on risky portfolio

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1. You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of treasury bills that pay 4% and a risky portfolio, P, constructed with 2 risky securities X and Y. The optimal weights of X and Y in P are 40% and 60% respectively. X has an expected rate of return of 18% and Y has an expected rate of return of 10%. To form a complete portfolio with an expected rate of return of 10%, what percentage of your complete portfolio should you invest in treasury bills?

2. Using the data from problem 5, if the risky portfolio, P, has a standard deviation of 25%, what is the standard deviation of the complete portfolio that you formed in problem 5?

3. Using the data from problems 5 and 6, what is the 5% Value at Risk (VaR) for the expected return on the risky portfolio P?

Reference no: EM13877682

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