Assume that you manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 41%. The A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio su constraint that the overall portfolio's standard deviation will not exceed 30%. Required: . What is the investment proportion, y? (Do not round intermediate calculations. Round your answer to 2 decimal p
Assume that you manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 41%. The A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio su constraint that the overall portfolio's standard deviation will not exceed 30%. Required: . What is the investment proportion, y? (Do not round intermediate calculations. Round your answer to 2 decimal p
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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Transcribed Image Text:Assume that you manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 41%. The T-bill rate is 4%
A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the
constraint that the overall portfolio's standard deviation will not exceed 30%.
Required:
a. What is the investment proportion, y? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
> Answer is complete but not entirely correct.
Investment proportion y
71.43%
b. What is the expected rate of return on the overall portfolio? (Do not round intermediate calculations. Round your answer to 2
decimal places.)
> Answer is complete but not entirely correct.
Rate of
return
31.34 X %
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