Question

You manage a risky portfolio with an expected rate of return of 22% and a standard deviation of 35%. The T-bill rate is 6%. Your client chooses to invest 75% of a portfolio in your fund and 25% in a T-bill money market fund.

Suppose that your risky portfolio includes the following investments in the given proportions:

Stock A	33	%
Stock B	36	%
Stock C	31	%

What are the investment proportions of your client’s overall portfolio, including the position in T-bills? (Round your answers to 1 decimal place.)

	Investment Proportions
T-Bills		%
Stock A		%
Stock B		%
Stock C		%

Answer 1

It is given that the client chooses to invest 75% of a portfolio in your fund and 25% in a T-bill money market fund. So, we can find the investment proportions of the client as follows:

Stock A=.75X.33=0.2475=24.75%=24.8%

Stock B=.75X.36=0.27=27%

Stock C=.75X.31=0.2325=23.25%=23.3%

T-bills=25%

The investment proportions of the client's overall portfolio are shown in the below mentioned table:

	Investment Proportions
Stock A	24.8%
Stock B	27%
Stock C	23.3%
T-bills	25%