Problem $6-29($Algo$)$

You estimate that a passive portfolio, for example, one imvested in a firky portolle that mimics the Stp sod stock inder, offers an expected rate of retum of $16\%$ with a shandard deviation of $25\%.$ Wou manage an active porfollo with espected rebiom $27$ and

Dequired:

a$.$ If he chove to imest in the passlve portiolia, what proportion, y$,$ mould he selfoct?

b$.$ What is the fee $($percentage of the investment in your fund deductied at the end of the yead that you cen charge to make the client indifleremt betareen your fund and the passlve strabegy aflectied by his capilal allocation decision fle, his choice of yif