You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 28%. The T-bill rate is 8%. Suppose your risky portfolio contains the following positions: Stock A Stock B Stock C 25% 32% 43% 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 16%. a. What is the proportion y? b. What are your client's investment proportions in your three stocks and the T-bill fund? c. What is the standard deviation of the rate of return on your client's portfolio?
You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 28%. The T-bill rate is 8%. Suppose your risky portfolio contains the following positions: Stock A Stock B Stock C 25% 32% 43% 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 16%. a. What is the proportion y? b. What are your client's investment proportions in your three stocks and the T-bill fund? c. What is the standard deviation of the rate of return on your client's portfolio?
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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am. 37.
Transcribed Image Text:You manage a risky portfolio with an expected rate
of return of 18% and a standard deviation of 28%. The T-bill rate is 8%.
Suppose your risky portfolio contains the following positions:
Stock A
Stock B
Stock C
25%
32%
43%
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 16%.
a. What is the proportion y?
b. What are your client's investment proportions in your three stocks and the T-bill fund?
c. What is the standard deviation of the rate of return on your client's portfolio?
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