How comfortable are you writing this whole paragraph goddam I could never divide 100
Answer:
y = 0.80
Step-by-step explanation:
Given:
- The expected rate of return for risky portfolio E(r_p) = 0.18
- The T-bill rate is r_f = 0.08
Find:
Investing proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 16%.
What is the proportion y?
Solution:
- The proportion y is a fraction of expected risky portfolio and the left-over for the T-bill compliance. Usually we see a major proportion is for risky portfolio as follows:
E(r_c) = y*E(r_p) + (1 - y)*r_f
y*E(r_p) + (1 - y)*r_f = 0.16
- Re-arrange for proportion y:
y = ( 0.16 - r_f ) / (E(r_p) - r_f)
- Plug in values:
y = ( 0.16 - 0.08 ) / (0.18 - 0.08)
y = 0.80
- Hence, we see that 80% of the total investment budget becomes a part of risky portfolio returns.
Since we have the 2.1 next to the parenthesis, we need to first distribute.
2.1 * x & 2.1 * 5
2.1x + 10.5
Then we take that and add the equals seven to the problem to move onto the next step.
2.1x + 10.5 = 7
We must get the 2.1x alone, therefore subtracting the 10.5 as it will also be subtracted on the other side as well.
2.1x + 10.5 = 7
- 10.5 -10.5
2.1x = -3.5
To get the x alone, we must divide both sides by 2.1, therefore removing the 2.1 from the x.
2.1x = -3.5
/2.1 /2.1
x = 1.66666666667
Hope this helped!
- Kat
Option C is correct
x < 1
