Question
Assume that you manage a risky portfolio with an expected rate of return of 20% and...
Assume that you manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 44%. The T-bill rate is 4%.
Your risky portfolio includes the following investments in the given proportions:
| Stock A | 28 | % |
| Stock B | 37 | % |
| Stock C | 35 | % |
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 16%.
a. What is the proportion y? (Round your answer to 3 decimal places.)
Proportion y
b. What are your client's investment proportions in your three stocks and the T-bill fund? (Round your intermediate calculations and final answers to 2 decimal places.)
| Security | Investment Proportions |
|
| T-Bills | % | |
| Stock A | % | |
| Stock B | % | |
| Stock C | % | |
c. What is the standard deviation of the rate of return on your client's portfolio? (Round your intermediate calculations and final answer to 2 decimal places.)
Standard deviation % per year
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