**Portfolio Management Exercise**You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 36%. The T-bill rate is 6%.Your risky portfolio includes the following investments in the given proportions:- **Stock A:** 27%- **Stock B:** 35%- **Stock C:** 38%---Suppose that your client decides to invest in your portfolio a proportion \( y \) of the total investment budget so that the overall portfolio will have an expected rate of return of 15%.**a. What is the proportion \( y \)?** *(Round your answer to the nearest whole number.)*- **Proportion \( y \):** [Input Box] %---**b. What are your client’s investment proportions in your three stocks and the T-bill fund?** *(Do not round intermediate calculations. Round your answers to 2 decimal places.)*| | **Investment Proportions** ||---------------------------|----------------------------|| **T-Bills** | [Input Box] % || **Stock A** | [Input Box] % || **Stock B** | [Input Box] % || **Stock C** | [Input Box] % |---**c. What is the standard deviation of the rate of return on your client’s portfolio?** *(Do not round intermediate calculations. Round your answer to 2 decimal places.)*- **Standard deviation:** [Input Box] %

Risky portfolio rate of return (Re) = 18% Risky portfolio standard deviation (Se) = 36% T bill rate…

Answered: You manage a risky portfolio with an…

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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You manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 29%. The T-bill rate is 3%. Your client chooses to invest 65% of a portfolio in your fund and 35% in a T-bill money market fund. What is the reward-to-volatility (Sharpe) ratio (S) of your risky portfolio? Your client's? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Your reward-to-volatility (Sharpe) ratio Client's reward-to-volatility (Sharpe) ratio
Consider two well-diversified portfolios: Portfolio 1 has an expected return of 8% and a beta of 0.80 while Portfolio 2 has an expected return of 13% and a beta of 1.50. If the risk-free rate is 1.5%, which portfolio would a rational risk-averse investor prefer and why? O A. Portfolio 2 because it has the higher reward to risk ratio. O B. Portfolio 1 because it has the higher reward to risk ratio. OC. Portfolio 2 because it has the higher reward. O D. Portfolio 1 because it has the lower risk.
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Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 27% 33 40 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 15%. Required: a. What is the proportion y? (Round your answer to 1 decimal place.) Proportion y 0.8 X %
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K You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 37%. The T-bill rate is 4%. Your client chooses to invest 80% of a portfolio in your fund and 20% in a T-bill money market fund. What is the reward-to-volatility (Sharpe) ratio (S) of your risky portfolio? Your client's? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Your reward-to-volatility (Sharpe) ratio Client's reward-to-volatility (Sharpe) ratio

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