Question: Problem 6-17 You manage a risky portfolio with an expected rate of return of 21% and a standard deviation of 31%. The T-bill rate is

Problem 6-17

You manage a risky portfolio with an expected rate of return of 21% and a standard deviation of 31%. The T-bill rate is 5%.

Your risky portfolio includes the following investments in the given proportions:


Stock A	25	%
Stock B	36	%
Stock C	39	%

Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 17%.

a. What is the proportion y? (Round your answer to the nearest whole number.)

b. What are your clients investment proportions in your three stocks and the T-bill fund? (Do not round intermediate calculations. Round your answers to 2 decimal place.)

T-Bills

Stock A

Stock B

Stock C

c. What is the standard deviation of the rate of return on your clients portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal place.)

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