Assume that you manage a risky portfolio with an expected rate of return of 14% and astandard deviation of 30%. The T-bill rate is 6%.Your client decides to invest in your risky portfolio a proportion (y) of his total investmentbudget with the remainder in a T-bill money market fund so that his overall portfolio willhave an expected rate of return of 13%a. What is the proportion y? (Enter your answer as a decimal number rounded to 2decimal places.)Proportion yb. What is the standard deviation of the rate of return on your client's portfolio? (Enteryour answer as a percentage rounded to two decimal places.)Standard% per yeardeviation

a.Calculation of Proportion y:The Proportion y is 87.50%.

Answered: Assume that you manage a risky…

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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