Question
Assume that you manage a risky portfolio with an expected rate of return of 17% and...
|
Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 28%. The T-bill rate is 5.9%. |
| Your risky portfolio includes the following investments in the given proportions: |
| Stock A | 21 | % |
| Stock B | 42 | % |
| Stock C | 37 | % |
|
Suppose a 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 11.45%. |
| Required: |
| (a) | What is the proportion y? (Round your answer to 1 decimal place.) |
| Proportion |
| (b) |
What are your client's investment proportions in your three stocks and the T-bill fund? (Round your answers to 2 decimal places. Omit the "%" sign in your response.) |
| 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 answer to 2 decimal places. Omit the "%" sign in your response.) |
| Standard deviation | % |
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