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 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%. if you decide to hold 25% of your complete portfolio in the risky portfolio and 75% in the treasury bills, then the dollar values of your positions in x and y, respectively, would be and a. $300; $450 b. $150; $100 c. $450; $300 d. $100; $150

Investment in risky portfolio = 25% x $1,000 = $250

Dollar value of Investment in project X = 60% x $250 = $150

Dollar value of investment in project Y = 40% x $250 = $100

The correct answer is B

Explanation:

Since 25% of the total fund is invested in risky portfolio ie 25% x $1,000 = $250 and the weights of X and Y are 60% and 40% respectively.

Thus, the dollar amount of investment in each stock will be calculated according to their respective weights. ie X = 60% x $250 and Y = 40% x $250.

the answer is "b.the increased supply will create a surplus. "

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