- 15 Assume A World That Satisfies The Assumptions Of Portfolio Theory Going Short Is Allowed In This World Only The Two 1 (118.09 KiB) Viewed 31 times
15 Assume a world that satisfies the assumptions of portfolio theory. Going short is allowed. In this world only the two risky securities A and B are traded as shown in the figure below. The risk of A is equal to that of B. the risk of P1 is equal to that of P2 and the risk of P3 is equal to that of P4. MRP stands for the minimum risk portfolio XA (X2) refers to the fraction of the portfolio invested in A (B) where XA + X8 = 1 E(R) P3 B P2 MRP P1 A P4 +++ 10% 20% 0% 30% 40% (R) 1.0p Which of the following statements is correct? ជ O For portfolio P2, it holds that X^>0 and XB > XA: For portfolio P2. it holds that Xx <0 and X3 > 0. For portfolio P2, it holds that Xa = 0.5 and X8 = 0.5.