You Are Considering Investing $1000 in a Complete Portfolio

Multiple Choice

You are considering investing $1000 in a complete portfolio. The complete portfolio is composed of Treasury notes that pay 5% and a risky portfolio, P, constructed with two risky securities X and Y. The optimal weights of X and Y in P are 60% and 40% respectively. X has an expected rate of return of 14% and Y has an expected rate of return of 10%. To form a complete portfolio with an expected rate of return of 8%, you should invest approximately ________ in the risky portfolio. This will mean you will also invest approximately ________ and ________ of your complete portfolio in security X and Y respectively.

A) 0%, 60%, 40%
B) 25%, 45%, 30%
C) 40%, 24%, 16%
D) 50%, 30%, 20%