You manage a risky portfolio with expected rate of return of 7% and standard deviation of 15%.
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Question:
You manage a risky portfolio with expected rate of return of 7% and standard deviation of 15%. The T-bill rate is 4%.
1.Suppose that your client prefers to invest in your fund a proportionythat maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio's standard deviation will not exceed 10%, what is the investment proportiony?
2.Your client's degree of risk aversion is A = 3, what proportion,y, of the total investment should be invested in your fund? What is the expected value and standard deviation of the rate of return on your client's optimized portfolio?
Related Book For
Holt McDougal Larson Geometry
ISBN: 9780547315171
1st Edition
Authors: Ron Larson, Laurie Boswell, Timothy D. Kanold, Lee Stiff
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