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Draw the cal of your portfolio on an expected return

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Reference no: EM133163199

Question - Assume that you manage a risky portfolio with an expected rate of return of .25 and a standard deviation of 0.2. The T-bill rate is 0.07. Your client chooses to invest 0.70 of a portfolio in your portfolio and the balance in T-bills.

 i. What is the expected return and standard deviation of your client's portfolio?

ii. Suppose your portfolio includes the following investments in the given proportions: share X - 30%, share Y - 20%, and the balance is share Z. What are the investment proportions of each stock in your client's overall portfolio, including the position in T-bills?

iii. What is the Sharpe ratio (S) of your risky portfolio and your client's overall portfolio? Interpret the Sharpe ratios.

iv. Draw the CAL of your portfolio on an expected return/standard deviation diagram. What is the slope of the CAL? Show the position of your client on your fund's CAL.

Reference no: EM133163199

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