a
Adequate information:
Expected rate of
Standard deviation of the risky asset=28%
Complete portfolio’s standard deviation will not increase beyond 18%.
T-bill rate is 8%
Client decides to invest in your portfolio in the proportion Y
Overall portfolio’s expected rate of return =16%
To compute: The proportion of Y
Introduction:
Risky Portfolio: When there is a chance of non-accomplishment of financial objectives of an investment in a unit or combination of assets, it is termed as risky portfolio. A higher risk always carries higher return.
b
Adequate information:
Expected
Standard deviation of the risky asset=28%
T-bill rate is 8%
Client decides to invest in your portfolio in the proportion Y
Overall portfolio’s expected rate of return =16%
Complete portfolio’s standard deviation will not increase beyond 18%.
To compute: The expected rate of return on the complete portfolio.
Introduction:
Expected return of the portfolio: It is also called as weighted average expected return. So, it is must to consider both the weights and the expected return of both stocks.
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