Question
Assume that you manage a risky portfolio with an expected rate of return of 14% and...
Assume that you manage a risky portfolio with an expected rate
of return of 14% and a standard deviation of 38%. The T-bill rate
is 4%.
Your risky portfolio includes the following investments in the
given proportions:
| Stock A | 22 | % |
| Stock B | 31 | |
| Stock C | 47 | |
Your client decides to invest in your risky portfolio a proportion
(y) of his total investment budget with the remainder in a
T-bill money market fund so that his overall portfolio will have an
expected rate of return of 10%.
a. What is the proportion y? (Round your answer to 1 decimal places.)
b. What are your client's investment proportions
in your three stocks and in T-bills? (Round your
intermediate calculations and final answers to 2 decimal
places.)
c. What is the standard deviation of the rate of
return on your client's portfolio?
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