Assume that you manage a risky portfolio with an expected rate of return of 15%...
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Finance
Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 40%. The T-bill rate is 5%.
Your risky portfolio includes the following investments in the given proportions:
Stock A
24
%
Stock B
33
%
Stock C
43
%
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 13%.
a. What is the proportion y? (Round your answer to 2 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
Answer & Explanation
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