a. You manage a risky portfolio with E(r) =18% and σ = 28%. The T-Bill rate is 8%. Your client chooses to invest 70% of a portfolio in your funds and 30% in T-Bill funds. Calculate the Expected return and standard deviation of your client’s portfolio. b. Suppose that your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 25% 32% 43% c. What is the Sharpe ratio of your risky portfolio? Your client’s?
a. You manage a risky portfolio with E(r) =18% and σ = 28%. The T-Bill rate is 8%. Your client chooses to invest 70% of a portfolio in your funds and 30% in T-Bill funds. Calculate the Expected return and standard deviation of your client’s portfolio. b. Suppose that your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 25% 32% 43% c. What is the Sharpe ratio of your risky portfolio? Your client’s?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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7.
a. You manage a risky portfolio with E(r) =18% and σ = 28%. The T-Bill rate is
8%. Your client chooses to invest 70% of a portfolio in your funds and 30% in
T-Bill funds. Calculate the Expected return and standard deviation of your
client’s portfolio.
b. Suppose that your risky portfolio includes the following investments in the given
proportions:
Stock A
Stock B
Stock C
25%
32%
43%
c. What is the Sharpe ratio of your risky portfolio? Your client’s?
d. Draw the CAL of your portfolio. What is the slope of the CAL? Show the position of
your client on your fund’s CAL
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