You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of treasury bills that pay 5% and a risky portfolio, P, constructed with 2 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%.
1. To form a complete portfolio with an expected rate of return of 11%, you should invest __________ of your complete portfolio in treasury bills.
A. 19%
B. 25%
C. 36%
D. 50%
2. 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%