Assume that you manage a risky portfolio with an expected rate of return of 17% and a
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Question:
Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 4%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund.
a. | What is the expected return and standard deviation of your client's portfolio? (Round your answers to 2 decimal places.) |
Expected return | % per year | |
Standard deviation | % per year | |
b. | Suppose your risky portfolio includes the following investments in the given proportions: |
Stock A | 27% |
Stock B | 36% |
Stock C | 37% |
What are the investment proportions of your client’s overall portfolio, including the position in T-bills?(Round your answers to 2 decimal places.) |
Security | Investment Proportions | |
T-Bills | % | |
Stock A | % | |
Stock B | % | |
Stock C | % | |
c. | What is the reward-to-volatility ratio (S) of your risky portfolio and your client's overall portfolio? (Round your answers to 4 decimal places.) |
Reward-to-Volatility Ratio | |
Risky portfolio | |
Client’s overall portfolio |
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