You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 29%. The T-bill rate is 5%. Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio's standard deviation will not exceed 18%. a. What is the investment proportion, y? (Round your answer to 2 decimal places.) Investment proportion y b. What is the expected rate of return on the complete portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return %
You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 29%. The T-bill rate is 5%. Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio's standard deviation will not exceed 18%. a. What is the investment proportion, y? (Round your answer to 2 decimal places.) Investment proportion y b. What is the expected rate of return on the complete portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return %
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 13QTD
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![You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 29%. The T-bill rate is 5%.
Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio
subject to the constraint that the complete portfolio's standard deviation will not exceed 18%.
a. What is the investment proportion, y? (Round your answer to 2 decimal places.)
Investment proportion y
%
b. What is the expected rate of return on the complete portfolio? (Do not round intermediate calculations. Round your answer to 2
decimal places.)
Rate of return
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff947f14c-7f23-43a5-bcf8-dbada2e40763%2F9a60cca1-8fbd-4660-851c-85000513a36f%2Fuzibmh8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 29%. The T-bill rate is 5%.
Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio
subject to the constraint that the complete portfolio's standard deviation will not exceed 18%.
a. What is the investment proportion, y? (Round your answer to 2 decimal places.)
Investment proportion y
%
b. What is the expected rate of return on the complete portfolio? (Do not round intermediate calculations. Round your answer to 2
decimal places.)
Rate of return
%
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