Question
Assume that you manage a risky portfolio that has an expected return of 16 % and...
Assume that you manage a risky portfolio that has an expected return of 16 % and a standard deviation of 14%. The T-bill rate is 3%. A client wants to form a combined portfolio of T-bills and the risky portfolio that has an expected return of 13% .
What fraction y of the combined portfolio should be invested in the risky portfolio?
Based on the portfolio fraction y calculated in the previous question, what is the standard deviation of the combined portfolio of T-bills and the risky portfolio.
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Answer #1
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ANSWERS : 76.92% AND 10.77%
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