Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260316193
Author: Bodie
Publisher: MCG
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Chapter 5, Problem 14PS

For Problems 12-16, 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%.

14. Suppose the same client as in the previous problem 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 20%. (LO 5-3)
a. What is the investment proportion, y?
b. What is the expected rate of return on the overall portfolio?

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Essentials Of Investments

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