Assume that you manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 30%. The T-bill rate is 6%. Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 13% a. What is the proportion y? (Enter your answer as a decimal number rounded to 2 decimal places.) Proportion y b. What is the standard deviation of the rate of return on your client's portfolio? (Enter your answer as a percentage rounded to two decimal places.) Standard % per year deviation
Assume that you manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 30%. The T-bill rate is 6%. Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 13% a. What is the proportion y? (Enter your answer as a decimal number rounded to 2 decimal places.) Proportion y b. What is the standard deviation of the rate of return on your client's portfolio? (Enter your answer as a percentage rounded to two decimal places.) Standard % per year deviation
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 6P
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Question
![Assume that you manage a risky portfolio with an expected rate of return of 14% and a
standard deviation of 30%. The T-bill rate is 6%.
Your client decides to invest in your risky portfolio a proportion (y) of his total investment
budget with the remainder in a T-bill money market fund so that his overall portfolio will
have an expected rate of return of 13%
a. What is the proportion y? (Enter your answer as a decimal number rounded to 2
decimal places.)
Proportion y
b. What is the standard deviation of the rate of return on your client's portfolio? (Enter
your answer as a percentage rounded to two decimal places.)
Standard
% per year
deviation](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2d6abebd-9990-4216-bf39-94e7e640c84d%2F1c64d0d3-104f-49d9-8b20-1ce0bde9bc77%2F9yhwkn.png&w=3840&q=75)
Transcribed Image Text:Assume that you manage a risky portfolio with an expected rate of return of 14% and a
standard deviation of 30%. The T-bill rate is 6%.
Your client decides to invest in your risky portfolio a proportion (y) of his total investment
budget with the remainder in a T-bill money market fund so that his overall portfolio will
have an expected rate of return of 13%
a. What is the proportion y? (Enter your answer as a decimal number rounded to 2
decimal places.)
Proportion y
b. What is the standard deviation of the rate of return on your client's portfolio? (Enter
your answer as a percentage rounded to two decimal places.)
Standard
% per year
deviation
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