1. You are considering investing $1,700 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 4% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 75% and 25% respectively. X has an expected rate of return of 13%, and Y has an expected rate of return of 10%. To form a complete portfolio with an expected rate of return of 7%, 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%; 75%; 25%
B) 36%; 27%; 9%
C) 50%; 38%; 9%
D) 23%; 62%; 15%
2. An investor who expects an increase in interest rates would minimize her capital loss by purchasing a bond that has a _______ coupon and a _______ term to maturity
Zero, long
Low, long
High, short
High, long