1. Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 20% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 5%.

Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as follows: (Leave no cells blank - be certain to enter "0" wherever required. Do not enter your answer as a percentage but in a decimal format. Round "Expected Return" to 4 decimal places and the "Variance" to 4 decimal places.)

WBills	WIndex	Expected Return	Variance
0.0	1.0	0.1300	0.0400	Example
0.2	0.8	?	?
0.4	0.6	?	?
0.6	0.4	?	?
0.8	0.2	?	?
1.0	0.0	?	?

2.

Assume that you manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 34%. The T-bill rate is 8%.

Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. What is the expected value and standard deviation of the rate of return on his portfolio?

Expected return	%?
Standard deviation	%?

3. Assume that you manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 30%. The T-bill rate is 6%. Your client chooses to invest 65% of a portfolio in your fund and 35% in a T-bill money market fund.

What is the reward-to-volatility ratio (S) of your risky portfolio and your clients portfolio?

Your reward-to-volatility ratio	?
Client's reward-to-volatility ratio	?