Ask Question
8 September, 16:13

Consider a portfolio consisting of only Duke Energy and Microsoft. The percentage of your investment (portfolio weight) that you would place in Duke Energy stock to achieve a risk-free investment would be closest to: (1) 15%

(2) 4%

(3) 23%

(4) 10%

+1
Answers (1)
  1. 8 September, 19:54
    0
    (2) 4%

    Explanation:

    The portfolio is considered to be less risky if its volatility is low. The higher standard deviation the more risky is the project. For Duke Energy and Microsoft the investment portfolio required is risk free investment. To calculate the risk free rate we calculate using the formula;

    Var Rp = x1 2Var R1 + x2 2Var R2 + 2 x1 x2 Corr (R1, R2) SD1 SD2

    Var Rp = 0.14 + 0.44 + 2 (1) * (-1) * 6% * 24%

    Solving for this we get the risk free investment at 4%.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Consider a portfolio consisting of only Duke Energy and Microsoft. The percentage of your investment (portfolio weight) that you would ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers