Reference no: EM132934292
You want to create a portfolio equally as risky as the market, and you have $1,000,000 to invest. Using the information below, answer the following questions:
Asset Investment Beta
Stock A $185,000 .80
Stock B $320,000 1.13
Stock C $380,155.038 1.29
Risk-free asset 1 - 0.885155038 0.115
1. now suppose that you do not want to include the risk free asset into your portfolio. Your goal remains to construct a portfolio with the same systematic risk as the market portfolio. You wish to add Stock C to your portfolio and also to change the amount invested in stock B to achieve your goal. You want to leave your investment in Stock A as is (i.e. keep $185,000 invested in Stock A).
Problem a. What is the weight of Stock C in your reconfigured portfolio?
Problem b. What does this weight mean?
Problem c. What is the weight of Stock B in your reconfigured portfolio?
Problem d. How much money do you invest in Stock B?
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